Galima et al v. Association of Apartment Owners of Palm Court
ORDER DENYING DEFENDANT ASSOCIATION OF APARTMENT OWNERS OF PALM COURT'S AMENDED MOTION TO DISMISS SECOND AMENDED COMPLAINT [DKT 34 ]; AND GRANTING IN PART AND DENYING IN PART DEFENDANT BRYSON CHOW'S MOTION TO DISMISS [DKT. 34 ] SECOND AME NDED COMPLAINT re 39 Motion to Dismiss re 56 Motion to Dismiss. Signed by JUDGE LESLIE E. KOBAYASHI on 03/30/2017. The AOAO's Amended Motion to Dismiss Second Amended Complaint [Dkt 34], filed August 24, 2016, is HEREBY DENIED in its entirety, and Chow's Motion to Dismiss [Dkt. 34] Second Amended Complaint, filed October 31, 2016, is HEREBY GRANTED IN PART AND DENIED IN PART. Specifically, the Chow Motion is GRANTED insofar as the Court DISMISSES Pla intiffs' claims against Chow in Counts I, III, IV, and V WITH PREJUDICE. This Court DENIES the Chow Motion as to Plaintiffs' claim against Chow in Count II.This Court ORDERS Defendants to file their answers to the Second Amended Complain t by April 20, 2017. This Court emphasizes that the deadline applies even if a motion for reconsideration of this Order is filed. Any motion for reconsideration of this Order must be filed by April 17, 2017. (eps, )CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF).
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
RUDY AKONI GALIMA and ROXANA
ASSOCIATION OF APARTMENT
OWNERS OF PALM COURT, by and )
through its Board of
Directors; DOE DEFENDANTS 1- )
CIVIL 16-00023 LEK-KSC
ORDER DENYING DEFENDANT ASSOCIATION OF APARTMENT
OWNERS OF PALM COURT’S AMENDED MOTION TO DISMISS
SECOND AMENDED COMPLAINT [DKT 34]; AND GRANTING IN PART
AND DENYING IN PART DEFENDANT BRYSON CHOW’S
MOTION TO DISMISS [DKT. 34] SECOND AMENDED COMPLAINT
Before the Court are: Defendant Association of
Apartment Owners of Palm Court’s (“AOAO”)1 Amended Motion to
Dismiss Second Amended Complaint [Dkt 34] (“AOAO Motion”), filed
on August 24, 2016;2 and Defendant Bryson Chow’s (“Chow”) Motion
to Dismiss [Dkt. 34] Second Amended Complaint (“Chow Motion”),
filed on October 31, 2016.
[Dkt. nos. 39, 56.]
Rudy Akoni Galima and Roxana Beatriz Galima (“Plaintiffs”) filed
their memorandum in opposition to the AOAO Motion (“AOAO
Plaintiffs have sued the AOAO by and through its Board of
The AOAO’s original motion was filed on August 23, 2016.
[Dkt. no. 36.] It was terminated after the filing of the AOAO
Motion currently before this Court. [Dkt. no. 40.]
Opposition”) on October 28, 2016, and the AOAO filed its reply
(“AOAO Reply”) on November 3, 2016.
[Dkt. nos. 55, 58.]
Plaintiffs filed their memorandum in opposition to the Chow
Motion (“Chow Opposition”) on November 7, 2016, and Chow filed
his reply (“Chow Reply”) on November 21, 2016.
[Dkt. nos. 59,
The AOAO Motion and the Chow Motion (collectively
“Motions”) came on for hearing on December 5, 2016.
On February 28, 2017, this Court granted the AOAO’s
request for leave to submit supplemental exhibits in support of
the AOAO Motion, and this Court allowed the parties to file
supplemental memoranda addressing the new exhibits and the
Hawai`i Supreme Court’s recent decision in Hungate v. Law Office
of David B. Rosen, SCAP-13-0005234, 2017 WL 747870 (Hawai`i
Feb. 27, 2017).
[Dkt. nos. 73 (letter requesting leave), 74
(entering order granting leave).]
On March 2, 2017, the AOAO
filed the new exhibits (“Supplemental Exhibits”).
[Dkt. no. 74.]
On March 15, 2017, the parties filed their respective
[Dkt. nos. 75 (Chow Supplement), 76
(AOAO Supplement), 77 (Plaintiffs’ Supplement).]
consideration of the Motions, supporting and opposing memoranda,
the arguments of counsel, and the relevant legal authority, the
AOAO Motion is HEREBY DENIED in its entirety, and the Chow Motion
is HEREBY GRANTED IN PART AND DENIED IN PART.
Court DENIES the Chow Motion as to Count II, and GRANTS the Chow
Motion in all other respects.
This case poses a question of first impression as to
whether an AOAO could elect to use the former Haw. Rev. Stat.
Chapter 667, Part I when it was not a holder of a mortgage with a
power of sale.
This Court predicts the state supreme court will
determine an AOAO could not.
The background of this case relevant to the instant
Motion involves the filing of this action in the State of Hawai`i
Circuit Court of the First Circuit (“state court”).
First Amended Complaint was filed on January 15, 2016 in the
state court, and, on January 22, 2016, Defendant removed the case
to this district court based on federal question jurisdiction.
[Notice of Removal, filed 1/22/16 (dkt. no. 1), at ¶ 3.]
On August 19, 2016, Plaintiffs filed their Second
Amended Complaint, which alleges that Plaintiff Rudy Akoni Galima
(“Mr. Galima”) is a “member of the military service on active
[Dkt. no. 34 at ¶ 1.]
In March 2006, when Mr. Galima was
stationed in Hawai`i, Plaintiffs purchased Unit Number 10-A in a
condominium project known was Palm Court, Increment IC in Ewa
Beach (“the Unit” and “Palm Court”).
The AOAO is the Palm Court
[Id. at ¶¶ 8-10.]
In March 2008, Mr. Galima was reassigned to a duty
station outside of Hawai`i, and Plaintiffs rented the Unit.
Their tenant, however, failed to pay the rent on a consistent
basis, causing Plaintiffs to fall behind on their financial
obligations related to the Unit.
[Id. at ¶¶ 12-13.]
April 10, 2010, the AOAO recorded a $6,882.86 lien on the Unit
for unpaid assessments.
[Id. at ¶ 14.]
As a result of this
lien, Chow (the AOAO’s attorney) filed for nonjudicial
[Id. at ¶¶ 4, 18.]
Plaintiffs informed the AOAO and Chow (collectively
“Defendants”) that they were in the process of selling the Unit,
and Plaintiffs asked to establish a payment plan for the amounts
Plaintiffs entered into contract to sell the Unit for a
price that was below the market value (“the Short Sale”).
Plaintiffs negotiated a settlement with the holder of their first
mortgage, and they paid off their second mortgage.
In spite of these events, Defendants issued notice
that they would sell the Unit pursuant to Haw. Rev. Stat. § 514B146 and §§ 667-5 to 667-10 (“Chapter 667, Part I”), and
Defendants conducted the sale on about October 19, 2010.3
Sections 667-5, 667-5.7, 667-6, 667-7, and 667-8, which
were in effect in 2010, were repealed in 2012. 2012 Sess. Law.
Ch. Act 182, §§ 50-54. Act 182 also added a new § 667-1, setting
forth the chapter’s definitions, and made § 667-1 the only
statute in the current Part I of Chapter 667. Id. at § 3. All
references to “Chapter 667, Part I” in the instant Order refer to
the version of Part I in effect at the time of the nonjudicial
foreclosure of Plaintiffs’ Unit.
Section 667-1 (2010) became Haw. Rev. Stat. § 667-1.5. It
AOAO submitted the winning bid and executed a quitclaim deed as
both the grantor and the grantee.
November 9, 2010.
did not close.
The deed was recorded on
Because of Defendants’ actions, the Short Sale
Plaintiffs lost the Unit and remain liable for
the amount secured by their first mortgage.
[Id. at ¶¶ 18-21.]
Plaintiffs allege that: Defendants’ use of Chapter 667,
Part I was improper because the AOAO was not a holder of a
mortgage with a power of sale; and Defendants should have used
the process set forth in Haw. Rev. Stat. §§ 667-21 through 667-42
(“Chapter 667, Part II”).
Plaintiffs assert that Chapter 667,
Part II has consumer protection provisions for homeowners and
that Defendants used Chapter 667, Part I specifically to
circumvent these consumer protections.
Had Defendants complied
with Chapter 667, Part II, Plaintiffs contend they would not have
lost the Unit.
[Id. at ¶¶ 22-27.]
Plaintiffs also allege that Defendants fraudulently
concealed their wrongdoing “by implying, stating and/or
representing that they were authorized to conduct a nonjudicial
foreclosure or public sale under Part I.”
[Id. at ¶ 28.]
and the other foreclosure by action provisions are now within
Part IA of Chapter 667. Act 182 added a new part to Chapter 667
– designated Part VI – titled “Association Alternate Power of
Sale Foreclosure Process.” Haw. Rev. Stat. § 667-91 now states:
“The power of sale process in [part VI] is an alternative process
for associations to the foreclosure by action in part IA and the
foreclosure by power of sale in part II.”
Plaintiffs assert that, as members of the homeowner’s
association, they were entitled to rely – and did in fact rely –
upon Defendants’ representations about the AOAO’s asserted
authority under Chapter 667, Part I.
Plaintiffs therefore argue
that they did not discover their claims against Defendants until
sometime in December 2015.
[Id. at ¶¶ 29-30.]
The Second Amended Complaint alleges the following
claims: a wrongful foreclosure claim against Defendants
(“Count I”); a claim against Chow for violations of the Fair Debt
Collections Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq.
(“Count II”); a claim against Defendants for unfair or deceptive
acts or practices (“UDAP”) under Haw. Rev. Stat. § 480-2
(“Count III”); a fraud claim against Defendants (“Count IV”); and
a claim seeking “recovery against Defendants for mental anguish
and emotional distress” (“Count V”) [id. at ¶ 55 (emphasis
This Court construes Count V as alleging a claim for
the intentional infliction of emotional distress (“IIED”).
id. at ¶ 60 (“DEFENDANTS deliberately, intentionally and
wrongfully utilized the expedited power of sale process contained
in Part I” (bold emphasis added)).
Defendants seek dismissal of
Chapter 667, Part I and Part II
All of Plaintiffs’ claims are premised upon the theory
that Defendants’ use of Chapter 667, Part I to foreclose upon the
AOAO’s lien on the Unit was improper because they were required
to follow Chapter 667, Part II.
This Court will therefore
address this issue first.
The Second Amended Complaint alleges that Defendants
gave notice of the public sale of the Unit pursuant to Haw. Rev.
Stat. § 514B-146 and Chapter 667, Part I.
Complaint at ¶ 18.]
Haw. Rev. Stat. § 514B-22 states,4 in
Sections 514B-4, 514B-5, 514B-35, 514B-41(c),
514B-46, 514B-72, and part VI, and section
514B-3 to the extent definitions are necessary in
construing any of those provisions, and all
amendments thereto, apply to all condominiums
created in this State before July 1, 2006;
provided that those sections:
Shall apply only with respect to events
and circumstances occurring on or after
July 1, 2006; and
Shall not invalidate existing provisions
of the declaration, bylaws, condominium
map, or other constituent documents of
those condominiums if to do so would
invalidate the reserved rights of a
developer or be an unreasonable
The current version of § 514B-22 was also in effect at the
time of the events at issue in this case.
Section 514B-146 is within part VI of Chapter 514B.
impairment of contract.
According to the Second Amended Complaint, the Palm Court
homeowners’ association was created in or around 1990.
Amended Complaint at ¶ 9.]
There is no dispute that the events
at issue in this case occurred after July 1, 2006.
based on the allegations in the Second Amended Complaint, there
is no indication that § 514B-22(2) applies.
This Court therefore
CONCLUDES, for purposes of the instant Motions only, that
Chapter 514B applies.
The version of § 514B-146(a) in effect at the time of
the foreclosure of Plaintiffs’ Unit stated, in pertinent part:
All sums assessed by the association but unpaid
for the share of the common expenses chargeable to
any unit shall constitute a lien on the unit with
priority over all other liens . . .
The lien of the association may be foreclosed by
action or by nonjudicial or power of sale
foreclosure procedures set forth in chapter 667,
by the managing agent or board, acting on behalf
of the association, in like manner as a mortgage
of real property. . . .
Haw. Rev. Stat. § 514B-146(a) (2010).6
During the relevant time period, Chapter 667, Part I
contained the following provisions relevant to the instant case:
This Court notes that Chow argues that Haw. Rev. Stat.
Chapter 514A applies. See, e.g., Mem. in Supp. of Chow Motion at
12-13. Although this Court has concluded – for purposes of the
instant Motions – that Chapter 514B applies, this Court notes
that Haw. Rev. Stat. § 514A-90(a) (2010) was substantially
similar to § 514B-146(a) (2010).
Haw. Rev. Stat. § 667-1 (2010) stated: “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
Execution may be issued on the judgment, as
ordered by the court.”
Haw. Rev. Stat. § 667-5 (2010) stated, in pertinent part:
(a) When a power of sale is contained in a
mortgage, and where the mortgagee, the mortgagee’s
successor in interest, or any person authorized by
the power to act in the premises, desires to
foreclose under power of sale upon breach of a
condition of the mortgage, the mortgagee,
successor, or person shall be represented by an
attorney who is licensed to practice law in the
State and is physically located in the State. The
(1) Give notice of the mortgagee’s,
successor’s, or person’s intention to
foreclose the mortgage and of the sale of the
mortgaged property, by publication of the
notice once in each of three successive weeks
(three publications), the last publication to
be not less than fourteen days before the day
of sale, in a newspaper having a general
circulation in the county in which the
mortgaged property lies; and
(2) Give any notices and do all acts as are
authorized or required by the power contained
in the mortgage.
(b) Copies of the notice required under
subsection (a) shall be:
(1) Filed with the state director of
(2) Posted on the premises not less than
twenty-one days before the day of sale.
(c) Upon the request of any person entitled to
notice pursuant to this section and sections
667-5.5 and 667-6, the attorney, the mortgagee,
successor, or person represented by the attorney
shall disclose to the requestor the following
(1) The amount to cure the default, together
with the estimated amount of the foreclosing
mortgagee’s attorneys’ fees and costs, and
all other fees and costs estimated to be
incurred by the foreclosing mortgagee related
to the default prior to the auction within
five business days of the request; and
(2) The sale price of the mortgaged property
(d) Any sale, of which notice has been given as
aforesaid, may be postponed from time to time by
public announcement made by the mortgagee or by
some person acting on the mortgagee’s behalf.
Upon request made by any person who is entitled to
notice pursuant to section 667-5.5 or 667-6, or
this section, the mortgagee or person acting on
the mortgagee’s behalf shall provide the date and
time of a postponed auction, or if the auction is
canceled, information that the auction was
canceled. The mortgagee within thirty days after
selling the property in pursuance of the power,
shall file a copy of the notice of sale and the
mortgagee’s affidavit, setting forth the
mortgagee’s acts in the premises fully and
particularly, in the bureau of conveyances.
Haw. Rev. Stat. § 667-5(a)-(d) (2010).
In contrast, Chapter 667, Part II contained the
following provisions during the relevant time period:
Haw. Rev. Stat. § 667-21(a) (2010) stated: “The process in this
part is an alternative power of sale process to the foreclosure
by action and the foreclosure by power of sale in part I.”
Haw. Rev. Stat. § 667-40 states:7
A power of sale foreclosure under this part may be
used in certain non-mortgage situations where a
law or a written document contains, authorizes,
permits, or provides for a power of sale, a power
of sale foreclosure, a power of sale remedy, or a
nonjudicial foreclosure. These laws or written
documents are limited to those involving time
share plans, condominium property regimes, and
agreements of sale.
Chapter 667, Part II included procedural requirements protecting
the mortgagor, beyond what was required under Chapter 667,
For example, Part II had heightened notice requirements,
including requiring the foreclosing mortgagee to provide the
mortgagor with notice of how he could cure the default, Haw. Rev.
Stat. § 667-22 (2010), and additional requirements for the public
sale of the mortgaged property, Haw. Rev. Stat. §§ 667-25 to 66729 (2010).
Section 514B-146(a) (2010) allowed a condominium
association to foreclose on its lien through Chapter 667, Part I
or Part II, but it did not specify when each part could be used.8
The Second Amended Complaint alleges that there is federal
question jurisdiction pursuant to 28 U.S.C. § 1331 over
Plaintiffs’ FDCPA claim, and either diversity jurisdiction
The current version of § 667-40 was also in effect at the
time of the events at issue in this case.
In 2010, Part III of Chapter 667 was “Other Provisions,”
and Part IV was “Time Share Interest Foreclosures.” Neither part
is relevant to the instant case.
pursuant to 28 U.S.C. § 1332 or supplemental jurisdiction
pursuant to 28 U.S.C. § 1367(a) over their state law claims.
[Second Amended Complaint at ¶¶ 5-7.]
“When a district court
sits in diversity, or hears state law claims based on
supplemental jurisdiction, the court applies state substantive
law to the state law claims.”
Mason & Dixon Intermodal, Inc. v.
Lapmaster Int’l LLC, 632 F.3d 1056, 1060 (9th Cir. 2011).
interpreting § 514B-146(a) (2010) and the other Hawai`i statutes
relevant to the instant case, this Court is bound by the
decisions of the Hawai`i Supreme Court.
See Trishan Air, Inc. v.
Fed. Ins. Co., 635 F.3d 422, 427 (9th Cir. 2011).
The Hawai`i Supreme Court has not addressed the issue
of whether, pursuant to § 514B-146(a) (2010), a condominium
association could foreclose on its lien using the procedures set
forth in Chapter 667, Part I, or whether it was required to use
Chapter 667, Part II under certain circumstances.
In the absence of a governing state decision, a
federal court attempts to predict how the highest
state court would decide the issue, using
intermediate appellate court decisions, decisions
from other jurisdictions, statutes, treatises, and
restatements as guidance. [Trishan Air, 635 F.3d
at 427]; see also Burlington Ins. Co. v. Oceanic
Design & Constr., Inc., 383 F.3d 940, 944 (9th
Cir. 2004) (“To the extent this case raises issues
of first impression, our court, sitting in
diversity, must use its best judgment to predict
how the Hawai`i Supreme Court would decide the
issue.” (quotation and brackets omitted)).
Evanston Ins. Co. v. Nagano, 891 F. Supp. 2d 1179, 1189 (D.
Hawai`i 2012) (some citations omitted).
Thus, this Court is
tasked with predicting whether the Hawai`i Supreme Court would
hold that the Chapter 667, Part I foreclosure process was
available to the AOAO under the facts of this case.
Defendants ask this Court to consider two state circuit
court cases in which the circuit court granted motions to dismiss
that raised the same argument Defendants advance here – the
defendant condominium association was authorized to use
Chapter 667, Part I to foreclose upon its lien.
In Valencia v.
Association of Apartment Owners of Palm Villas II, et al., Civil
No. 16-1-1294-07 GWBC, the circuit court granted Defendants
Ekimoto & Morris, LLLC, Arlette S. Harada, and John A. Morris’s
(“Ekimoto Defendants”) motion to dismiss the Valencias’ First
[Chow Motion, Decl. of Peter W. Olson,
Exh. 3 (order granting the Ekimoto Defendants’ motion to dismiss
(“Valencia Order”)); id., Exh. 4 (Trans. of 9/21/16 hearing on
motion to dismiss (“Valencia Transcript”)).]
In Malabe v.
Association of Apartment Owners of Executive Centre, Civil
Defendant Ekimoto & Morris, LLLC is a Hawai`i law firm,
and Defendants Harada and Morris are Hawai`i attorneys. [Chow
Motion, Decl. of Peter W. Olson, Exh. 2 (First Amended Complaint
in Valencia) at ¶¶ 3-5.] According to the Valencias’ First
Amended Complaint, the Ekimoto Defendants advised the association
defendant “regarding the non-judicial foreclosure process and
also conducted the non-judicial foreclosure sale at issue” in
Valencia. [Id. at ¶ 10.]
No. 16-1-2256-12 RAN, the circuit court granted the defendant
association’s motion to dismiss the complaint.
Decl. of David R. Major (“Suppl. Major Decl.”), Exh. B (order
granting motion to dismiss (“Malabe Order”)); id., Exh. E (Trans.
of 2/2/17 hearing on motion to dismiss (“Malabe Transcript”)).]
This district court has recognized that “[a] federal
district court may look to state trial court decisions as
persuasive authority, but those decisions are not binding on the
Engle v. Liberty Mut. Fire Ins. Co., 402 F.
Supp. 2d 1157, 1161 (D. Hawai`i 2005) (citing Spinner Corp. v.
Princeville Dev. Corp., 849 F.2d 388, 390 (9th Cir. 1988); King
v. Order of United Commercial Travelers of America, 333 U.S. 153,
161, 68 S. Ct. 488, 92 L. Ed. 608 (1948)).
The Valencia Order
and the Malabe Order are not binding upon this Court, but it must
decide whether to consider those orders as persuasive authority.
First, this Court notes that each circuit court’s legal analysis
is not clear from either the order denying the motion to dismiss
or the transcript of the hearing on the motion.
procedural posture in each case does not render the orders
The Valencias have not had the opportunity to appeal
the Valencia Order because the proceedings in that case are ongoing, and the association defendant’s motion to dismiss appears
to be pending before the circuit court.
Malabe on February 17, 2017.
Judgment was entered in
[Suppl. Major Decl., Exh. C (Final
Judgment); id., Exh. D (Notice of Entry of Final Judgment).]
thirty-day period to file a notice of appeal has passed, see Haw.
R. App. P. 4(a)(1), and, according to the state court’s docket
sheet, the Malabes have not filed a notice of appeal.
reasons, this Court DECLINES to consider the rulings in Valencia
and Malabe as persuasive authority in the instant case.
Pursuant to § 514B-146(a) (2010), a condominium
association could foreclose upon its lien using the “foreclosure
procedures set forth in chapter 667.”
The AOAO argues that it
“is crystal clear” from this language “that the legislature
intended [to] afford condominium associations all three options
for foreclosure, including . . . non-judicial (HRS § 667-5).”
[Mem. in Supp. of AOAO Motion at 7.]
However, § 514B-146(a)
(2010) also stated that the condominium’s foreclosure pursuant to
Chapter 667 had to be “in like manner as a mortgage of real
Section 667-5(a) (2010) expressly stated, “[w]hen a
power of sale is contained in a mortgage, and where the
mortgagee . . . desires to foreclose under power of sale upon
breach of a condition of a mortgage . . . .”
The Hawai`i Supreme Court has construed this language as
requiring an agreed upon power of sale in a mortgage in order to
invoke the § 667-5 (2010) procedures.
The supreme court stated:
Prior to its repeal in 2012, HRS § 667–5
authorized the non-judicial foreclosure of
mortgaged property only “[w]hen a power of sale is
contained in a mortgage.” HRS § 667–5(a). This
court examined HRS § 667–5 in Lee v. HSBC Bank
USA, 121 Hawai`i 287, 218 P.3d 775 (2009), and
found that it “authorize[d] nonjudicial
foreclosure under a power of sale clause contained
in a mortgage.” Id. at 289, 218 P.3d at 777
(emphases added). In Lee, the plaintiffs argued,
and this court agreed, that “no state statute
creates a right in mortgagees to proceed by nonjudicial foreclosure; the right is created by
contract.” Id. at at [sic] 292, 218 P.3d at 780.
Thus, this court has held that HRS § 667–5
does not provide the nonjudicial power of
foreclosure but only allows its creation, if the
parties choose to do so, within the four corners
of a contract. See id.; see also Apao v. Bank of
N.Y., 324 F.3d 1091, 1095 (9th Cir. 2003) (finding
that HRS § 667–5 “did not confer the power of
sale, but merely authorized the parties to
contract for the express terms of foreclosure upon
Santiago v. Tanaka, 137 Hawai`i 137, 154–55, 366 P.3d 612, 629–30
(bold emphases added) (italic emphases and some alterations in
Santiago) (footnotes omitted), cert. denied, Tanaka v. Santiago,
137 S. Ct. 198 (2016).
In Lee, the Hawai`i Supreme Court also
A mortgagee, or an entity acting on its behalf,
cannot, however, proceed with a nonjudicial
foreclosure under a power of sale clause in the
mortgage unless it complies with either HRS
section 667–5, or its alternative HRS sections
667–21, et seq. Without such compliance, the
mortgagee has no legal authority to exercise its
power of sale in a nonjudicial foreclosure sale.
121 Hawai`i at 292, 218 P.3d at 780 (footnote omitted).
Plaintiffs argue that, without a power of sale provision and
compliance with the requirements of § 667-5, a condominium
association does not have the legal authority to conduct the
nonjudicial foreclosure sale.
In contrast, Chapter 667, Part II’s “alternative power
of sale process” is expressly made available “in certain nonmortgage situations” – such as in condominium property regimes –
“where a law or a written document contains, authorizes, permits,
or provides for a power of sale, a power of sale foreclosure, a
power of sale remedy, or a nonjudicial foreclosure.”
Further, unlike Chapter 667, Part I (which does not have a
specific definition of the term “mortgage”), Chapter 667, Part II
contains a broad definition of the term “mortgage.”
Part II, the term “mortgage” is not limited to the commonly
understood legal meaning of the term,10 but it also includes any
“other document under which property is . . . rendered subject to
For example, Black’s Law Dictionary includes the
following definitions of the term “mortgage”:
1. A conveyance of title to property that is given
as security for the payment of a debt or the
performance of a duty and that will become void
upon payment or performance according to the
stipulated terms. – Also termed (archaically) dead
pledge. 2. A lien against property that is
granted to secure an obligation (such as a debt)
and that is extinguished upon payment or
performance according to stipulated terms. 3. An
instrument (such as a deed or contract) specifying
the terms of such a transaction. 4. Loosely, the
loan on which such a transaction is based. 5. The
mortgagee’s rights conferred by such a
transaction. . . .
(10th ed. 2014.)
a lien for the purpose of securing the payment of money.”
Thus, a condominium document which renders a
condominium subject to a lien for the purpose of securing the
owner’s payment of association fees constituted a mortgage for
purposes of Chapter 667, Part II, even though it would not have
constituted a mortgage for purposes of Chapter 667, Part I.
Further, unlike § 667-5 (2010), which – as interpreted
by the Hawai`i Supreme Court – required that the mortgagor and
the mortgagee agreed to the power of nonjudicial foreclosure,
Chapter 667, Part II also contains a broad definition of “power
of sale” that is not limited to the creation by the parties of
the power “within the four corners of a contract.”
of Part II: “‘Power of sale’ or ‘power of sale foreclosure’ means
a nonjudicial foreclosure under this part when the mortgage
contains, authorizes, permits, or provides for a power of sale, a
power of sale foreclosure, a power of sale remedy, or a
§ 667-21(b) (2010).
Thus, even a
traditional mortgage which does not contain an agreed-upon power
of sale provision may be deemed to contain a power of sale or to
authorize a power of sale foreclosure for purposes of
Chapter 667, Part II.
Only a limited class of mortgages – or liens that are
deemed to be like a mortgage – may be foreclosed using
Chapter 667, Part I, whereas a much broader range of liens may be
foreclosed using Chapter 667, Part II, including liens created
pursuant to documents deemed to be like mortgages by operation of
This is consistent with the Hawai`i State Legislature
including far more protections for the mortgagor in Part II than
in Part I.
Because it is easier for a mortgagee to foreclose
under Part I, the threshold requirements for Part I to apply are
Thus, this Court concludes that: the statutes in
question (as interpreted by the Hawai`i Supreme Court) are
unambiguous; and a plain language reading of the statutes shows
that there are situations when a condominium association cannot
use Chapter 667, Part I to foreclose upon its lien – i.e., when
the association does not have an agreement with the homeowner
providing for a power of sale.11
Although this Court could stop
its analysis there, this Court also notes that its interpretation
of Chapter 667 is consistent with the legislative intent behind
the 2010 versions of the statutes in question.12
When a federal district court interprets a provision of
the Hawai`i Revised Statutes, “the court first looks to its plain
language.” Cycle City, Ltd. v. Harley-Davidson Motor Co., 81 F.
Supp. 3d 993, 1008 (D. Hawai`i 2014) (citing Awakuni v. Awana,
115 Hawai`i 126, 165 P.3d 1027, 1033–34 (2007)).
This district court has stated:
If the statutory language is plain and
unambiguous, the courts give effect to the
statute’s plain meaning. Haw. State Teachers
Ass’n v. Abercrombie, 271 P.3d 613, 615 (Haw.
2012) (quoting Haw. Gov’t Emps. Ass’n, AFSCME
Local 152, AFL–CIO v. Lingle, 239 P.3d 1, 6 (Haw.
The Hawai`i Supreme Court’s discussion in Hungate of
the legislative history behind the 2008 amendments to Chapter 667
[A]mendments to the foreclosure process set forth
in HRS chapter 667 Part I were intended to
“expand the rights of mortgagors.” Kondaur
Capital Corp. v. Matsuyoshi, 136 Hawai`i 227, 239,
361 P.3d 454, 466 (2015) (explaining that
amendments to former HRS § 667-5 “added
requirements that mortgagees must fulfill in order
to accomplish a valid foreclosure sale” resulting
in a benefit to mortgagors by “expand[ing] and
bolster[ing] the protections to which they are
. . . [A] close reading of the legislative
history of the 2008 amendment shows it was enacted
to set additional burdens on the mortgagee to
protect the mortgagor . . . . The amendment’s
structure or scheme attempted “to streamline and
ensure transparency in the non-judicial
foreclosure process by requiring a foreclosure
mortgagee to provide pertinent information
regarding the property to interested parties.” S.
2010)). If the statutory language is ambiguous,
the Hawaii courts look to the context in which the
ambiguous terms are used. Id.
Implicit in the analysis of a statute’s terms
is the consideration of the legislature’s intent.
Haw. State Teachers Ass’n, 271 P.3d at 615. The
Hawaii Supreme Court has recognized that state
statutes should be interpreted in a manner that
avoids absurd, contradictory, illogical, and
inconsistent results. Seki ex rel. Louie v. Haw.
Gov’t Emps. Ass’n, AFSCME Local No. 152, AFL–CIO,
328 P.3d 394, 409–10 (Haw. 2014); Gray v.
Administrative Dir. of the Court, 931 P.2d 580,
590 (Haw. 1997).
Wagner v. Lahaina Baptist Church, Civil No. 16-00186 HG-RLP, 2016
WL 5339346, at *3 (D. Hawai`i Sept. 22, 2016).
Stand. Comm. Rep. No. 2108, in 2008 Senate
Journal, at 917 (emphasis added).
2017 WL 747870, at *9 (italic emphases and some alterations in
Hungate) (bold emphases added); see also id. (“the statute was
amended to benefit the ‘party in breach of the mortgage
agreement’” (quoting H. Stand. Comm. Rep. No. 1192, in 2008 House
Journal, at 1450)).
Section 514B-146(a) (2010) – which was in
effect in 2008 when the legislature enacted the 2008 amendments
to Chapter 667 – provided that the foreclosure of a condominium
association lien was to be treated like the foreclosure of a
Because the legislature is presumed to have been aware
of that fact when it enacted the 2008 amendments to
Chapter 667,13 the legislature is also presumed to have intended
that the additional protections provided for mortgagors in the
amendments to Chapter 667 would also be available to condominium
owners subject to condominium association liens.
Under Defendants’ proposed interpretation of § 514B146(a) (2010), a condominium association could choose freely
between judicial foreclosure, Part I foreclosure, or Part II
In other words, Defendants assert that Chapter 667,
Part I foreclosure was available to the association regardless of
whether there was an agreed upon power of sale.
In this Court’s
“[T]he legislature is presumed to know the law when
enacting statutes[.]” Tamashiro v. Dep’t of Human Servs., 112
Hawai`i 388, 427, 146 P.3d 103, 142 (2006) (some alterations in
Tamashiro) (citation and quotation marks omitted).
view, this is an illogical, and almost absurd, interpretation of
§ 514B-146(a) (2010) because it would render Chapter 667, Part II
meaningless in the context of condominium association liens.
Condominium associations would simply avoid additional burdens
imposed in Part II if they could proceed under Part I without
Further, if foreclosing associations were allowed
to use Part I without an agreed upon power of sale (something
foreclosing mortgagees could not do), then the mandate in § 514B146(a) (2010) that the foreclosure of an association lien be
treated “in like manner as a mortgage of real property” would be
This Court therefore REJECTS Defendants’ proposed
interpretation of § 514B-146(a) (2010) as being contrary to the
related legislative history of Chapter 667 and to the principles
of statutory construction.
Having examined the relevant statutes, their
legislative history, and instructive case law regarding the
foreclosure of mortgages, this Court PREDICTS that the Hawai`i
Supreme Court would reject Defendants’ proposed interpretation of
§ 514B-146(a) (2010) and would agree with Plaintiffs’ proposed
Thus, this Court CONCLUDES that, because § 514B-
146(a) (2010) required a condominium association to foreclose
upon its lien “in like manner as a mortgage of real property,” an
association could only use the Chapter 667, Part I foreclosure
procedure if it had an agreement with the condominium owner
providing for a power of sale.
To the extent that the AOAO
Motion and the Chow Motion ask this Court to conclude that
condominium associations could freely elect between the Chapter
667, Part I foreclosure procedure and the Part II procedure, the
Motions are both DENIED.
This Court now turns to the issue of whether each of
Plaintiffs’ claims states a plausible claim for relief.
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (“To survive a motion
to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible
on its face.’” (quoting Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 570, 127 S. Ct. 1955 (2007))).
Count I - Wrongful Foreclosure
The AOAO argues that Hawai`i courts have not expressly
recognized that a wrongful foreclosure cause of action exists,
but it acknowledges that this district court has recognized that
there may be certain circumstances under which Hawai`i courts
would recognize the claim.
This district court has stated: “A
plaintiff may bring a wrongful foreclosure claim where: (1) ‘the
foreclosure process failed to comply with Haw. Rev. Stat.
Chapter 667[;]’ and (2) the foreclosing entity did not have the
right to foreclose.”
Uy v. HSBC Bank USA, Nat’l Ass’n, Civ. No.
14-00261 HG-KSC, 2015 WL 1966689, at *8 (D. Hawai`i Apr. 30,
2015) (alteration in Uy) (quoting Lowther v. U.S. Bank N.A., Civ.
No. 13–00235 LEK–BMK, 2013 WL 4777129, at *20, 21 (D. Haw. Sept.
Further, in Federal Home Loan Mortgage Corp. v.
Kama, this district court noted that the Hawai`i Supreme Court’s
decision in Kondaur Capital Corp. v. Matsuyoshi, 136 Hawai`i 227,
361 P.3d 454 (2015), supported the proposition that there is a
cognizable wrongful foreclosure claim under Hawai`i law.
Civ. No. 14-00137 ACK-KSC, 2016 WL 922780, at *5–6 (D. Hawai`i
Mar. 9, 2016).
Even more recently, in Hungate, the Hawai`i
Supreme Court held that “creating a cause of action under former
HRS § 667-5 is not necessary to protect the interests of the
the mortgagor can protect its interests through
filing a claim against the mortgagee for wrongful
foreclosure. See Santiago v. Tanaka, 137 Hawai`i
137, 158-59, 366 P.3d 612, 633-34 (2016) (holding
the nonjudicial foreclosure was wrongful and
awarding restitution to mortgagor). When voiding
the foreclosure is not possible, the mortgagor is
entitled to “restitution of their proven
out-of-pocket losses” through a wrongful
foreclosure claim. Id. at 158, 366 P.3d at 633.
Because mortgagees could be required to provide
restitution to injured mortgagors under a wrongful
foreclosure claim, a “sufficient incentive” exists
for mortgagees to ensure that the foreclosure
proceedings are correctly performed by attorneys.
Best Place, Inc. [v. Penn Am. Ins. Co.], 82
Hawai`i [120,] 127, 920 P.2d [334,] 341
[(1996)]. . . .
2017 WL 747870, at *10 (emphasis added).
This Court therefore
The Lowther order cited in Uy v. HSBC Bank as 2013 WL
4777129 is the same order cited as Lowther v. U.S. Bank N.A., 971
F. Supp. 2d 989, 1013-14 (D. Hawai`i 2013).
concludes that wrongful foreclosure is a cognizable claim under
Plaintiffs’ Second Amended Complaint alleges that,
although Defendants gave notice and conducted the public sale of
the Unit pursuant to Chapter 667, Part I, they were required to
use Chapter 667, Part II, [Second Amended Complaint at ¶¶ 18, 22,
26,] because the AOAO “did not hold a mortgage [– or, by virtue
of § 514B-146(a) (2010) – a lien that is treated like a mortgage
–] containing a power of sale,” [id. at ¶ 25].
that they suffered damages because of Defendants’ wrongful use of
Chapter 667, Part I because, had Defendants complied with the
provisions of Chapter 667, Part II, Plaintiffs would not have
lost the Unit.
[Id. at ¶¶ 27, 34.]
This Court CONCLUDES that
these allegations are sufficient to state the elements of a
wrongful foreclosure claim against the AOAO.15
This Court notes that Plaintiffs argue that, even if the
AOAO was authorized to use Chapter 667, Part I, the foreclosure
of the Unit was still wrongful because the AOAO failed to comply
with the requirements of Ulrich v. Security Inv. Co., 35 Haw.
158, 182 (Haw. Terr. 1939). This Court notes that the Hawai`i
Supreme Court has “recently reaffirmed Ulrich and recognized that
this common law duty extends to mortgagees conducting nonjudicial foreclosure sales of real property.” Hungate, 2017 WL
747870, at *10 (citing Kondaur Capital Corp. v. Matsuyoshi, 136
Hawai`i 227, 361 P.3d 454 (2015)). However, this Court does not
construe Count I of Plaintiffs’ Second Amended Complaint as
alleging a wrongful foreclosure claim against the AOAO based on
the failure to comply with the requirements in Ulrich. If
Plaintiffs intend to assert such a claim, they must obtain leave
of court to file a third amended complaint.
Defendants have argued that Plaintiffs’ claims are
This Court has predicted that the Hawai`i Supreme
Court would hold that a six-year limitations period applies to
wrongful foreclosure claims pursuant to Haw. Rev. Stat. § 6571(1).16
Lowther, 971 F. Supp. 2d at 1013-14 (discussing
Niutupuivaha v. Wells Fargo Bank, N.A., Civil No. 13-00172
LEK-KSC, 2013 WL 3819600, at *9 (D. Hawai`i July 22, 2013)).
In the instant case, the foreclosure sale of the Unit
occurred “on or about October 19, 2010.”
Complaint at ¶ 18.]
Plaintiffs filed this action well within six
years of that date.
See Notice of Removal, Decl. of David R.
Major, Exh. A (First Amended Complaint, filed in state court on
January 15, 2016).
Therefore, this Court REJECTS Defendants’
argument that it should dismiss Count I on the ground that the
claim is untimely.
Haw. Rev. Stat. § 657-1(1) states:
The following actions shall be commenced within
six years next after the cause of action accrued,
and not after:
(1) Actions for the recovery of any debt
founded upon any contract, obligation, or
liability, excepting such as are brought upon
the judgment or decree of a court; excepting
further that actions for the recovery of any
debt founded upon any contract, obligation,
or liability made pursuant to chapter 577A
shall be governed by chapter 577A[.]
Because Plaintiffs have sufficiently pleaded the
elements of their wrongful foreclosure claim against the AOAO,
and this Court concludes – for purposes of the instant Motions
only – that the claim is timely, the AOAO Motion is DENIED as to
Plaintiffs’ claim against the AOAO in Count I.17
Claim against Chow
Relevant to Plaintiffs’ wrongful foreclosure claim
against Chow, the Hawai`i Supreme Court stated in Hungate,
“[a]lthough [the bank’s attorney] failed to follow some
requirements of former HRS § 667-5, we hold that the statute did
not create a cause of action against attorneys who fail to follow
2017 WL 747870, at *8.
The Hawai`i Supreme
Court was not addressing the issue of whether a mortgagor can
bring a wrongful foreclosure claim against the attorney who
represented the mortgagee in the foreclosure process; it was
addressing whether there was a cause of action against the
mortgagee’s attorney directly under the former § 667-5.
the analysis is the same for the wrongful foreclosure claim
against Chow in the instant case.
Section 667-5 (2010) imposed
duties upon the foreclosing mortgagee to protect the mortgagor’s
rights, and the failure to comply with the requirements of that
statute could be vindicated through a wrongful foreclosure claim
To the extent that the AOAO Motion raises any other
arguments regarding Count I that are not expressly addressed in
this section, those arguments are also rejected.
against the mortgagee, not the mortgagee’s attorney.
therefore CONCLUDES that a mortgagor cannot bring a wrongful
foreclosure action against the mortgagee’s attorney for failing
to comply with the requirements of Chapter 667.
foreclosure of a condominium association’s lien is treated like
the foreclosure of a mortgage, a condominium owner cannot bring a
wrongful foreclosure action against the condominium association’s
attorney for failing to comply with the requirements of
Plaintiffs’ wrongful foreclosure claim against Chow
fails to state a claim upon which relief can be granted.
Fed. R. Civ. P. 12(b)(6).
Further, this Court CONCLUDES that
Plaintiffs’ wrongful foreclosure claim against Chow cannot be
saved by any amendment.
See Sonoma Cty. Ass’n of Retired Emps.
v. Sonoma Cty., 708 F.3d 1109, 1118 (9th Cir. 2013) (“As a
general rule, dismissal without leave to amend is improper unless
it is clear, upon de novo review, that the complaint could not be
saved by any amendment.” (brackets, citation, and internal
quotation marks omitted)).
This Court therefore GRANTS the Chow
Motion insofar as Plaintiffs’ claim in Count I against Chow is
DISMISSED WITH PREJUDICE.
III. Count II - FDCPA Claim
Count II alleges that Chow violated 15 U.S.C. § 1692f,
which states, in pertinent part:
A debt collector may not use unfair or
unconscionable means to collect or attempt to
collect any debt. Without limiting the general
application of the foregoing, the following
conduct is a violation of this section:
. . . .
(6) Taking or threatening to take any
nonjudicial action to effect dispossession or
disablement of property if–
(A) there is no present right to
possession of the property claimed
as collateral through an
enforceable security interest[.]
For purposes of the FDCPA:
The term “debt collector” means any person who
uses any instrumentality of interstate commerce or
the mails in any business the principal purpose of
which is the collection of any debts, or who
regularly collects or attempts to collect,
directly or indirectly, debts owed or due or
asserted to be owed or due another. . . .
15 U.S.C. § 1692a(6).
Whether Chow is a “Debt Collector”
Chow argues that Count II fails as a matter of law
because nonjudicial foreclosures – including foreclosures by
condominium associations – are not actions to collect a debt for
purposes of the FDCPA.
However, the Ninth Circuit has stated:
[T]he FDCPA “applies to the litigating activities
of lawyers.” Heintz [v. Jenkins], 514 U.S. [291,]
294, 115 S. Ct. 1489 [(1995)]. The Supreme
Court’s reasoning in Heintz was twofold. First,
the Court reasoned that lawyers who collect debts
through litigation plainly fall within the
statutory language defining “‘debt collector[s]’”
to include those who “‘regularly collec[t] or
attemp[t] to collect, directly or indirectly,
[consumer] debts owed or due or asserted to be
owed or due another.’” Id. (quoting 15 U.S.C. §
1692a(6) (alterations in original)). Second, the
Court observed that an earlier version of the
FDCPA provided an exemption for lawyers, but that
Congress had since repealed that exemption. See
id. at 294–95, 115 S. Ct. 1489; Pub. L. No.
95–109, § 803(6)(F), 91 Stat. 874, 875 (1977)
(exempting from the definition of the term “debt
collector” “any attorney-at-law collecting a debt
as an attorney on behalf of and in the name of a
client”); Pub. L. No. 99–361, 100 Stat. 768 (1986)
(repealing the exemption); see also 15 U.S.C.
§ 1692a(6)(A)-(F) (listing current exceptions to
the definition of “debt collector,” none of which
McCollough v. Johnson, Rodenburg & Lauinger, LLC, 637 F.3d 939,
951 (9th Cir. 2011) (some alterations in McCollough).
It is true that this district court has recognized that
borrowers/mortgagors cannot bring FDCPA claims against
lenders/mortgagees based on mortgage foreclosure proceedings:
To the extent the FDCPA claim is based on the
foreclosure proceedings, the claim fails as a
matter of law. See, e.g., Caraang v. PNC
Mortgage, 795 F. Supp. 2d 1098, 1107 (D. Hawai`i
2011) (“This district court has ruled that a
lender pursuing a nonjudicial foreclosure is not
attempting to collect a debt for purposes of the
FDCPA.”); Hanaway v. JPMorgan Chase Bank, No. SACV
10–1809 DOC(PLAx), 2011 WL 672559, at *4 (C.D.
Cal. Feb. 15, 2011) (“Since a transfer in interest
is the aim of a foreclosure, and not a collection
of debt, the foreclosure proceeding is not a debt
collection action under the FDCPA.”); Aniel v.
T.D. Serv. Co., No. C 10–03185 JSW, 2010 WL
3154087, at *1 (N.D. Cal. Aug. 9, 2010) (“[A]
negations relating to the FDCPA claim relate to
foreclosure proceedings and courts throughout this
circuit have concluded that foreclosure does not
constitute ‘debt collection’ under the FDCPA.”).
Mather v. Cent. Pac. Bank, Civil. No. 14-00139 LEK-BMK, 2014 WL
5580963, at *4 (D. Hawai`i Oct. 31, 2014) (alteration in Mather)
Similarly, Chow argues that Plaintiffs cannot assert a
FDCPA claim against him because “‘a nonjudicial foreclosure is
not an attempt to collect a debt for purposes of the FDCPA.’”
[Mem. in Supp. of Chow Motion at 36 (quoting Kitamura v. AOAO of
Lihue Townhouse, 2013 WL 1398058, at *4 (D. Haw. 2013)
However, in cases where courts have applied
the principle that a nonjudicial foreclosure is not an attempt to
collect a debt in the context of condominium association liens,
the plaintiffs were attempting to bring FDCPA claims against the
See Doran v. Aus, 308 F. App’x 49, 51 (9th Cir.
2009) (holding that the homeowners’ association “was not a debt
collector under the FDCPA, because it was collecting its own
debt” (citing 15 U.S.C. § 1692a(6))); Kitamura v. AOAO of Lihue
Townhouse, Civil No. 12-00353 LEK-BMK, 2013 WL 1398058, at *4 (D.
Hawai`i Mar. 29, 2013) (“the claims against the AOAO must fail
because it is not a ‘debt collector’ under the FDCPA because it
has not attempted to collect a debt ‘owed or due another’”
(quoting 15 U.S.C. § 1692a(6))); see also Minichino v. Piilani
Homeowners Ass’n, CIVIL NO. 16-00461 DKW-RLP, 2016 WL 5796799, at
*4 (D. Hawai`i Sept. 30, 2016) (same); Moore v. Nat’l City Mortg.
Co., CV No. 09-00461 DAE-KSC, 2010 WL 914334, at *4 (D. Hawai`i
Mar. 15, 2010).
In contrast, an attorney representing a condominium
association in a nonjudicial foreclosure proceeding is attempting
to collect a debt “owed or due another.”
See 15 U.S.C.
Further, while a condominium association’s lien is
treated like a mortgage under § 514B-146(a) (2010), the treatment
of the lien like a mortgage does not extend to enforcement of the
lien for purposes of a FDCPA claim.
As previously noted, the aim
of a foreclosure of a mortgage is to transfer interest in the
property securing the defaulted mortgage, but the situation in
the foreclosure of an association’s lien is not necessarily the
In the present case, the AOAO’s lien for unpaid
assessments was in the amount of $6,882.86, and approximately
four years prior to the recording of this lien, Plaintiffs
purchased the Unit for approximately $312,000.00, significantly
more than the lien amount.
[Second Amended Complaint at ¶¶ 10,
For purposes of the instant Motions, this Court must take
the factual allegations in Plaintiffs’ Second Amended Complaint
See Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at
555, 127 S. Ct. 1955).
Based on upon the reasonable inferences
from the factual allegations of the Second Amended Complaint,18
this Court concludes that Plaintiffs have pleaded a plausible
“A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550
at 556, 127 S. Ct. 1955).
claim that the purpose of the AOAO’s nonjudicial foreclosure was
to collect its debt, not to transfer interest in the Unit.19
In addition, the Second Amended Complaint alleges that
Chow “at the times relevant herein . . . routinely demanded sums
of money and attempted to collect said sums of money by sending
letters and publishing notices falsely stating that [he] was
authorized to use Part I to collect delinquent homeowner
[Second Amended Complaint at ¶ 38.]
therefore CONCLUDES that Plaintiffs have sufficiently alleged
that Chow is a “debt collector” for purposes of the FDCPA.
Defendants have argued that Plaintiffs’ claims are
Under the FDCPA: “An action to enforce any liability
created by this subchapter may be brought in any appropriate
United States district court without regard to the amount in
controversy, or in any other court of competent jurisdiction,
within one year from the date on which the violation occurs.”
U.S.C. § 1692k(d).
In Lyons v. Michael & Associates, the Ninth
Circuit noted that:
[I]n general, the discovery rule applies to
statutes of limitations in federal litigation,
that is, “[f]ederal law determines when the
This Court acknowledges that the AOAO did actually obtain
title to the Unit in the public sale. [Second Amended Complaint
at ¶ 19.] However, that alone does not show that the purpose of
the AOAO’s invocation of the nonjudicial foreclosure process was
to transfer interest in the Unit.
limitations period begins to run, and the general
federal rule is that ‘a limitations period begins
to run when the plaintiff knows or has reason to
know of the injury which is the basis of the
824 F.3d 1169, 1171 (9th Cir. 2016) (alterations in Lyons)
(quoting Mangum v. Action Collection Serv., Inc., 575 F.3d 935,
940 (9th Cir. 2009)).
The Ninth Circuit noted that it held in
Mangum that the discovery rule applied to Mangum’s FDCPA claim
regarding “wrongful disclos[ure of] her debt information to an
The Ninth Circuit also noted that, after
Mangum, it applied the discovery rule to an FDCPA claim regarding
debt collection letters.
Id. (citing Tourgeman v. Collins Fin.
Servs., Inc., 755 F.3d 1109, 1118 n.5 (9th Cir. 2014)).
discussing these cases, the Ninth Circuit rejected the argument
that the discovery rule only applies to certain FDCPA violations.
Id. at 1172 (“Applying the discovery rule to some FDCPA claims
but not others would be out of step with our general approach to
the discovery rule, and would threaten to capriciously limit the
broad, remedial scope of the FDCPA.”).
This Court therefore
CONCLUDES that the discovery rule applies to the determination of
when the statute of limitations on Plaintiffs’ FDCPA claim began
Although Defendants argue that the FDCPA statute of
limitations is not subject to tolling, there is no Ninth Circuit
case law, or order of this district court stating so.
Court concludes that tolling of the statute of limitations for
FDCPA claims is possible, but courts have often ruled that
tolling was not warranted under the facts presented.
Crow v. Ocwen Loan Servicing, LLC, CIVIL NO. 15-00161 SOM/KJM,
2016 WL 3557008, at *9 (D. Hawai`i June 24, 2016) (ruling that
the plaintiff’s “unfamiliarity with the law does not toll the
FDCPA’s statute of limitations when he knew or should have known
about the actions supporting any FDCPA claim within a year from
his first written notice”); Wilson v. Gordon & Wong Law Grp.,
P.C., No. 2:13-cv-00609-MCE-KJN, 2013 WL 5230387, at *3 (E.D.
Cal. Sept. 16, 2013) (noting that, in a prior order in the case,
“the Court declined to toll the statute of limitations and
explained, ‘[a]t no point does Plaintiffs’ Complaint allege any
facts suggesting that equitable tolling should apply to the FDCPA
. . . statute of limitations’”).
Plaintiffs allege that:
28. DEFENDANTS fraudulently concealed the
wrong they were committing by implying, stating
and/or representing that they were authorized to
conduct a nonjudicial foreclosure or public sale
under Part I.
29. As members of the homeowner association,
PLAINTIFFS were entitled to rely on and did rely
on the statements and representations made by
DEFENDANTS concerning DEFENDANTS’ right to conduct
a public sale under Part I.
30. PLAINTIFFS did not discover the claims
against DEFENDANTS that they assert herein until
sometime in December of 2015.
[Second Amended Complaint at ¶¶ 28-30.]
factual allegations to be true, this Court CONCLUDES that their
factual allegations support a reasonable inference that their
FDCPA claim against Chow is timely, based on either the discovery
rule or equitable tolling because Plaintiffs allege reasonable
reliance on the representations of their homeowners’ association.
At the motion to dismiss stage, this is sufficient to distinguish
Plaintiffs’ position regarding discovery and/or tolling from
arguments based on solely on the plaintiff’s ignorance of the
Determining the merits of Plaintiffs’ position will involve
mixed issues of law and fact that cannot be decided in a motion
This Court therefore CONCLUDES that Count II states a
plausible FDCPA claim against Chow.
The Chow Motion is DENIED as
to Count II.
Count III - UDAP Claim
In Count III, Plaintiffs assert a UDAP claim against
Haw. Rev. Stat. § 480-2(a) states, in pertinent
part, “unfair or deceptive acts or practices in the conduct of
any trade or commerce are unlawful.”
Section 480-2(d) states:
“No person other than a consumer, the attorney general or the
director of the office of consumer protection may bring an action
based upon unfair or deceptive acts or practices declared
unlawful by this section.”
For purposes of Chapter 480:
“‘Consumer’ means a natural person who, primarily for personal,
family, or household purposes, purchases, attempts to purchase,
or is solicited to purchase goods or services or who commits
money, property, or services in a personal investment.”
Rev. Stat. § 480-1.
Plaintiffs are natural persons.
According to the
Second Amended Complaint, they purchased the Unit when Mr. Galima
was stationed in Hawai`i, and they rented the Unit when he was
reassigned outside of Hawai`i.
¶¶ 10, 12.]
[Second Amended Complaint at
Taking Plaintiffs’ factual allegations to be true,
this Court CONCLUDES that the allegations support a reasonable
inference that Plaintiffs are consumers for purposes of § 480-1
because they committed money in a personal investment.
v. Leticia Query Realty, Inc., 80 Hawai`i 54, 67, 905 P.2d 29, 42
(1995) (holding that “by purchasing the home at issue in the
present case, the Cieris committed money in a personal
investment, and accordingly have standing as ‘consumers’”).
Trade or Commerce
In addition to their standing as consumers, Plaintiffs
must allege that Defendants’ conduct occurred in the course of
“trade or commerce.”
In Hungate, the plaintiff alleged a similar UDAP claim
to the one Plaintiffs allege against Chow.
Hungate alleged that
the foreclosing bank’s attorney, inter alia, failed to comply
with the requirements of Chapter 667, and this conduct also
constituted unfair and deceptive trade acts.
2017 WL 747870, at
The Hawai`i Supreme Court rejected the attorney’s
argument that Hungate was not a consumer of the attorney’s
It was sufficient that Hungate was a consumer based on
his mortgage with the bank.
Id. at *14.
However, the supreme
court also rejected Hungate’s argument that the attorney acted as
the bank’s agent in the foreclosure process and was therefore
subject to a UDAP claim.
Hungate’s argument was based on Cieri,
which held that a real estate agent or broker could be named as a
defendant in a UDAP claim arising from a real estate transaction.
The supreme court noted, inter alia, that an attorney’s role in
an adversarial process was distinguishable from the role of a
real estate agent or broker, and that allowing UDAP claims
against a foreclosing bank’s attorney could compromise the
attorney’s representation of the bank.
Id. at *14-15.
therefore held that “based on the allegations against [the
attorney], we decline to recognize a UDAP claim against him by
Hungate under HRS § 480-2 in the instant foreclosure action.”
Id. at *15.
In light of the similarity in the UDAP claims against
the attorneys, the same analysis applies to Plaintiffs’ UDAP
claim against Chow in the instant case.
This Court therefore
CONCLUDES that, because Chow’s alleged conduct upon which
Plaintiffs rely to support their UDAP claim did not occur in the
course of “trade or commerce” between Plaintiffs and Chow,
Plaintiffs’ UDAP claim against Chow fails as a matter of law.
Further, this Court CONCLUDES that Plaintiffs’ UDAP claim against
Chow cannot be saved by any amendment.
This Court therefore
GRANTS the Chow Motion insofar as Plaintiffs’ claim in Count III
against Chow is DISMISSED WITH PREJUDICE.
Hawai`i courts have recognized other jurisdictions’
interpretation of “trade or commerce” as being within the
Cieri, 80 Hawai`i at 63-65, 905 P.2d at 37-
39 (discussing and adopting several Massachusetts cases stating
that trade or commerce is within the business context); see also
Dalesandro v. Longs Drug Stores Cal., Inc., 383 F. Supp. 2d 1244,
1250 (D. Hawai`i 2005) (adopting the Cieri court’s interpretation
of trade or commerce).
The Hawai`i Supreme Court has stated that
a § 480-2 claim “is not available where the transaction is
strictly private in nature, and is in no way undertaken in the
ordinary course of a trade or business.”
Cieri, 80 Hawai`i at
63, 905 P.2d at 38.
Although not directly on point, the supreme
court’s analysis of this issue with regard to the foreclosing
bank in Hungate is instructive:
Transactions conducted in a business context, “by
their very nature, include transactions conducted
by a financial institution,” such as a “loan
extended by a financial institution[.]” [Haw.
Cmty. Fed. Credit Union v.] Keka, 94 Hawai`i
[213,] 227, 11 P.3d [1,] 15 [(2000)]. Thus, the
nature of a non-judicial foreclosure, which
results from a loan transaction, is that of a
transaction conducted in the business context. It
is undisputed that [the bank] is a financial
institution regularly engaged in providing loans
and conducting foreclosures. [The bank’s] acts
throughout the foreclosure proceedings therefore
occurred in the business context.
2017 WL 747870, at *12 (some alterations in Hungate).
Condominium associations are empowered to provide a variety of
services to the condominium, which ultimately benefit the
condominium owners, such as: “[h]iring and discharg[ing] managing
agents and other independent contractors, agents, and employees;”
“[r]egulat[ing] the use, maintenance, repair, replacement, and
modification of common elements;” and “[c]aus[ing] additional
improvements to be made as a part of the common elements.”
Rev. Stat. § 514B-104(a)(3), (6), (7).20
In order to conduct
these functions, the association collects regular assessments
from condominium owners.
The association’s powers also include:
The version of § 514B-104 which is currently in effect
was also in effect at the time of the events at issue in this
“[i]mpos[ing] charges and penalties, including late fees and
interest, for late payment of assessments”; and “[i]nstitut[ing]
. . . litigation or administrative proceedings in its own name on
behalf of itself or two or more unit owners on matters affecting
§ 514B-104(a)(11), (4).
This Court therefore
CONCLUDES that the AOAO’s placement of a lien on Plaintiffs’ Unit
for unpaid assessments and its foreclosure of that lien occurred
in the business context, and the AOAO’s conduct may give rise to
a UDAP claim.
The AOAO also argues that this Court should dismiss
Plaintiffs’ UDAP claim against it because the claim is untimely.
Haw. Rev. Stat. § 480-24 states:
Any action to enforce a cause of action arising
under this chapter shall be barred unless
commenced within four years after the cause of
action accrues, except as otherwise provided in
section 480-22. For the purpose of this section,
a cause of action for a continuing violation is
deemed to accrue at any time during the period of
Thus, this Court has stated that the limitations period for a
UDAP claim “starts to run upon the occurrence of the defendant’s
Lowther, 971 F. Supp. 2d at 1008 (citations,
internal quotation marks and brackets omitted).
As previously noted, the public sale occurred on or
about October 19, 2010.
[Second Amended Complaint at ¶ 18.]
Plaintiffs also allege that “[t]he quitclaim deed was recorded on
November 9, 2010 and since that time AOAO has possessed,
controlled and enjoyed the [Unit] and all of its benefits.”
at ¶ 20.]
Even assuming that the nonjudicial foreclosure process
was not complete until, and the alleged UDAP violation ended on,
November 9, 2010, Plaintiffs failed to bring this action within
four years of that date.
Thus, Plaintiffs’ UDAP claim against
the AOAO is time-barred unless the limitations period may be
Plaintiffs contend that the statute of limitations
period was tolled because Defendants fraudulently concealed the
fact that the AOAO was not authorized to foreclose under
Chapter 667, Part I.
This district court has stated:
“A statute of limitations may be tolled if the
defendant fraudulently concealed the existence of
a cause of action in such a way that the
plaintiff, acting as a reasonable person, did not
know of its existence.” Hexcel Corp. v. Ineos
Polymers, Inc., 681 F.3d 1055, 1060 (9th Cir.
2012). Fraudulent concealment involves the
actions taken by a liable party to conceal a known
cause of action, and has been defined as
“employment of artifice, planned to prevent
inquiry or escape investigation, and mislead or
hinder acquirement of information disclosing a
right of action.” Hancock v. Kulana Partners,
LLC, 992 F. Supp. 2d 1053, 1062 (D. Haw. Jan. 10,
2014) (quoting Au [v. Au], 626 P.2d [173,] 178
[(Haw. 1981)] (internal quotation marks and
brackets omitted). In order for the doctrine of
fraudulent concealment to apply, “[t]he acts
relied on must be of an affirmative character and
fraudulent.” Id. (quoting Au, 626 P.2d at 178).
Under both Hawaii and California law, there can be
no fraudulent concealment if there is a “known
cause of action.” See Mroz v. Hoaloha Na Eha,
Inc., 360 F. Supp. 2d 1122, 1129 (D. Haw. 2005)
(“If there is a known cause of action there can be
no fraudulent concealment[.]”). Moreover,
It is not necessary that a party should know
the details of the evidence by which to
establish his cause of action. It is enough
that he knows that a cause of action exists
in his favor, and when he has this knowledge,
it is his own fault if he does not avail
himself of those means which the law provides
for prosecuting or preserving his claim.
Mroz, 360 F. Supp. 2d at 1129 (internal quotation
marks and citation omitted).
Moddha Interactive, Inc. v. Philips Elec. N. Am. Corp., 92 F.
Supp. 3d 982, 996 (D. Hawai`i 2015), aff’d sub nom., 654 F. App’x
484 (Fed. Cir. 2016).
For the same reasons set forth in the discussion of
whether Plaintiffs have pleaded a sufficient basis for tolling of
the statute of limitations applicable to their FDCPA claim, this
Court also CONCLUDES that Plaintiffs have pleaded a sufficient
basis to support tolling of their UDAP claim against the AOAO and
that the merits of Plaintiffs’ tolling argument cannot be
determined at the motion to dismiss stage.
The Court therefore DENIES the AOAO Motion as to
Plaintiffs’ UDAP claim against the AOAO in Count III.
Count IV - Fraud
Count IV alleges a fraud claim against both Defendants.
The elements of a fraud claim are: “(1) false representations
were made by defendants, (2) with knowledge of their falsity (or
without knowledge of their truth or falsity), (3) in
contemplation of plaintiff’s reliance upon these false
representations, and (4) plaintiff did rely upon them.”
v. Gucci Am., Inc., 94 Hawai`i 368, 386, 14 P.3d 1049, 1067
Although Hungate did not involve a fraud claim against
the foreclosing mortgagee’s attorney, this Court predicts that
the Hawai`i Supreme Court would apply the same analysis that it
applied to the UDAP claim and would hold that a mortgagor cannot
bring a fraud claim against a mortgagee’s attorney for alleged
misrepresentations made during a nonjudicial foreclosure process.
This Court therefore CONCLUDES that Plaintiffs’ fraud claim
against Chow fails as a matter of law and that it is not possible
for Plaintiffs to cure the defects in the claim by amendment.
The Chow Motion is GRANTED insofar as Plaintiffs’ fraud claim
against Chow in Count IV is DISMISSED WITH PREJUDICE.
First, insofar as Defendants raised general challenges
to the timeliness of Plaintiffs’ claims, this Court will address
whether Plaintiffs’ fraud claim is time-barred.
fraud claim is subject to the six-year limitations period in Haw.
Rev. Stat. § 657-1(4).21
See Lynch v. Fed. Nat’l Mortg. Ass’n,
CIVIL NO. 16-00213 DKW-KSC, 2016 WL 6776283, at *3 (D. Hawai`i
Nov. 15, 2016) (some citations omitted) (citing Eastman v.
McGowan, 86 Hawai`i 21, 946 P.2d 1317, 1323 (1997)).
allege that the AOAO fraudulently represented, throughout the
nonjudicial foreclosure process, that it had the authority to
proceed under Chapter 667, Part I.
As previously noted, the
process arguably concluded on either October 19, 2010 or
November 9, 2010, and Plaintiffs filed this action within six
years of either of those dates.
This Court therefore CONCLUDES –
for purposes of the AOAO Motion only – that Plaintiffs’ fraud
claim against the AOAO is timely.
To the extent that the AOAO
Motion argues that this Court should dismiss Plaintiffs’ fraud
claim against the AOAO as time-barred, the AOAO Motion is DENIED.
This Court has recognized that fraud claims are subject
to a heightened pleading standard.
The AOAO argues that this
Court must dismiss Count IV because Plaintiffs did not plead
their fraud claim with sufficient particularity.
[Fed. R. Civ. P.] 9(b) requires that, “[i]n
alleging fraud or mistake, a party must state with
particularity the circumstances constituting fraud
or mistake.” Pursuant to Rule 9(b), a party is
required to make particularized allegations of the
Pursuant to § 657-1(4), the six-year limitations period
applies to “[p]ersonal actions of any nature whatsoever not
specifically covered by the laws of the State.”
circumstances constituting fraud. See Sanford v.
MemberWorks, Inc., 625 F.3d 550, 557–58 (9th Cir.
In their pleadings, Plaintiffs “must allege
the time, place, and content of the fraudulent
representation; conclusory allegations do not
suffice.” See Shroyer v. New Cingular Wireless
Servs., Inc., 622 F.3d 1035, 1042 (9th Cir. 2010)
(citation omitted). “Malice, intent, knowledge,
and other conditions of a person’s mind may be
alleged generally.” Fed. R. Civ. P. 9(b); see
also Odom v. Microsoft Corp., 486 F.3d 541, 554
(9th Cir. 2007) (en banc) (“[T]he state of mind —
or scienter — of the defendants may be alleged
generally.” (citation omitted)); Walling v.
Beverly Enters., 476 F.2d 393, 397 (9th Cir. 1973)
(stating that Rule 9(b) “only requires the
identification of the circumstances constituting
fraud so that the defendant can prepare an
adequate answer from the allegations” (citations
When there are multiple defendants,
Rule 9(b) does not allow a complaint to
merely lump multiple defendants together but
require[s] plaintiffs to differentiate their
allegations when suing more than one
defendant . . . and inform each defendant
separately of the allegations surrounding his
alleged participation in the fraud. In the
context of a fraud suit involving multiple
defendants, a plaintiff must, at a minimum,
identif[y] the role of [each] defendant in
the alleged fraudulent scheme.
Swartz v. KPMG LLP, 476 F.3d 756, 764–65 (9th Cir.
2007) (alterations in Swartz) (internal quotation
marks and citations omitted); see also Meridian
Project Sys., Inc. v. Hardin Constr. Co., 404 F.
Supp. 2d 1214, 1226 (E.D. Cal. 2005) (“When fraud
claims involve multiple defendants, the complaint
must satisfy Rule 9(b) particularity requirements
for each defendant.” (citations omitted)).
Barker v. Gottlieb, 23 F. Supp. 3d 1152, 1164-65 (D. Hawai`i
2014) (alterations in Barker) (some citations omitted).
First, although there are two defendants named in Count
IV, this Court has dismissed Count IV as to Chow.
also notes that Plaintiffs asserted an agency theory of liability
against Chow and the actions that Chow allegedly took during the
foreclosure process were taken on behalf of the AOAO.
Court only reads the allegations related to Count IV as being
attributed to the AOAO.
As to the time, place, and content of the allegedly
fraudulent representation, Plaintiffs’ clearly base their fraud
claim on the AOAO’s representation that it was authorized to
conduct a foreclosure sale of the Unit pursuant to Chapter 667,
[Second Amended Complaint at ¶ 51.]
The only specific
time and place identified is the public sale of the Unit, which
occurred on or about October 19, 2010.
[Id. at ¶ 18.]
there were presumably other points in the nonjudicial foreclosure
process when the AOAO represented it had the authority to proceed
under Chapter 667, Part I, the Second Amended Complaint does not
identify those with particularity.
However, the Second Amended
Complaint does sufficiently plead the time, place, and content of
the alleged fraudulent representation at the public sale.
As to the AOAO’s intent, Count IV alleges that the AOAO
“falsely represented that [it was] authorized to sell the
Apartment at a public sale under Part I.”
Complaint at ¶ 51.]
Although “intent, knowledge, and other
conditions of a person’s mind may be alleged generally,”
Rule 9(b), paragraph 51 is not enough to allege that the AOAO
made the alleged misrepresentation with knowledge of its falsity
(or without knowing whether it was true or false).
general allegations of the Second Amended Complaint also assert
that the AOAO “fraudulently concealed the wrong [it was]
committing by implying, stating and/or representing that [it was]
authorized to conduct a nonjudicial foreclosure or public sale
under Part I.”
[Second Amended Complaint at ¶ 28.]
concludes that this allegation is sufficient to satisfy the
general pleading requirement for the knowledge requirement of
Plaintiffs’ fraud claim.
This Court therefore CONCLUDES that Plaintiffs’ fraud
claim against the AOAO is sufficiently pled.
The AOAO’s other
challenges to Plaintiffs’ claim, such as whether it was
reasonable for Plaintiffs to rely on the AOAO’s position
regarding the applicable law, are not appropriate at the motion
to dismiss stage.
The AOAO may wish to revisit such arguments at
a later stage in these proceedings.
The AOAO Motion is DENIED as to the AOAO’s request to
dismiss Plaintiffs’ fraud claim against it in Count IV.
Count V - IIED
Count V alleges an IIED claim against both
“The elements of [IIED] pursuant to Hawaii law,
are: (1) that the act allegedly causing the harm was intentional
or reckless, (2) that the act was outrageous, and (3) that the
act caused (4) extreme emotional distress to another.”
Ohana Military Cmtys., LLC, Civil No. 14-00217 HG-KSC, 2014 WL
3529766, at *10 (D. Hawai`i July 15, 2014) (citing Enoka v. AIG
Hawaii Ins. Co., Inc., 128 P.3d 850, 872 (Haw. 2006)).
Although Hungate did not involve an IIED claim against
the foreclosing mortgagee’s attorney, this Court predicts that
the Hawai`i Supreme Court would apply the same analysis that it
applied to the UDAP claim and would hold that a mortgagor cannot
bring an IIED claim against a foreclosing mortgagee’s attorney
for his actions and omissions during a nonjudicial foreclosure
This Court therefore CONCLUDES that Plaintiffs’ IIED
claim against Chow fails as a matter of law and that it is not
possible for Plaintiffs to cure the defects in the claim by
This Court therefore GRANTS the Chow Motion insofar
The AOAO Motion also presents arguments about whether
Plaintiffs have sufficiently pleaded a claim for negligent
infliction of emotional distress (“NIED”). This Court will not
address those arguments because it does not construe Count V as
alleging an NIED claim.
as Plaintiffs’ IIED claim against Chow in Count V is DISMISSED
The AOAO argues that this Court must dismiss
Plaintiffs’ IIED claim against it because the claim is timebarred.
An IIED claim is subject to a two-year statute of
Kuehu v. United Airlines, Inc., Civ. No. 16-00216
ACK-KJM, 2016 WL 4445743, at *6 (D. Hawai`i Aug. 23, 2016) (“The
Hawaii tort statute provides a two-year statute of limitations,
which has been determined to apply to IIED claims.” (citing Haw.
Rev. Stat. § 657-7)).23
The discovery rule applies to the
limitations period for an IIED claim.
See, e.g., DeRosa v. Ass’n
of Apartment Owners of the Golf Villas, 185 F. Supp. 3d 1247,
1260 (D. Hawai`i 2016), reconsideration denied, 2016 WL 3951061
(July 20, 2016).
According to the discovery rule under Hawai`i
law, “a cause of action accrues when the plaintiff knew or should
have known of the causal connection between the defendant’s
action and the damage done.”
Id. (citations omitted).
Section 657-7 states: “Actions for the recovery of
compensation for damage or injury to persons or property shall be
instituted within two years after the cause of action accrued,
and not after, except as provided in section 657-13.” The
exceptions identified in Haw. Rev. Stat. § 657-13 are not
applicable to the instant case.
For the same reasons set forth in the discussion of
Plaintiffs’ tolling arguments as to their FDCPA claim and their
UDAP claim, this Court also CONCLUDES that Plaintiffs have
pleaded a sufficient basis to support either tolling of their
IIED claim against the AOAO or an argument that their IIED claim
is timely based on the discovery rule.
The merits of Plaintiffs’
timeliness arguments cannot be determined at the motion to
To the extent that the AOAO Motion asks this
Court to dismiss Plaintiffs’ IIED claim against it as timebarred, the AOAO Motion is DENIED.
Whether the Claim is Sufficiently Pled
Plaintiffs allege that the AOAO “deliberately,
intentionally and wrongfully utilized the expedited power of sale
process contained in Part I to strip the [Unit] from Plaintiffs.”
[Second Amended Complaint at ¶ 60 (emphasis omitted).]
allege that, had the AOAO utilized Chapter 667, Part II, they
would not have lost the Unit, and the loss of the Unit damaged
their credit rating, as well as Mr. Galima’s military career,
which caused them to suffer “mental anguish and emotional
[Id. at ¶¶ 59, 61-62.]
Thus, Plaintiffs have clearly
pleaded the first and third elements of their IIED claim.
pled the fact that they suffered emotional distress, although
they did not plead the specific wording “extreme emotional
However, there is no heightened pleading requirement
for an IIED claim, and this Court concludes that the allegation
of “mental anguish” was sufficient to put the AOAO on notice that
Plaintiffs’ emotional distress was extreme.
See Enoka, 109
Hawai`i at 559, 128 P.3d at 872 (“extreme emotional distress
constitutes, inter alia, mental suffering, mental anguish,
nervous shock, and other highly unpleasant mental reactions”
(emphasis added) (citation and internal quotation marks
This Court therefore concludes that the Second
Amended Complaint sufficiently pleads the fourth element of
Plaintiffs’ IIED claim.
As to the second element (that the AOAO’s conduct was
outrageous), the Hawai`i Supreme Court has held that “[t]he term
‘outrageous’ has been construed to mean ‘without just cause or
excuse and beyond all bounds of decency.’”
This district court has stated:
In explaining the type of “outrageous”
conduct that gives rise to a claim for intentional
infliction of emotional distress, the Hawaii
Supreme Court has noted:
It has not been enough that the defendant has
acted with an intent which is tortious or
even criminal, or that he has intended to
inflict emotional distress, or even that his
conduct has been characterized by “malice,”
or a degree of aggravation which would
entitle the plaintiff to punitive damages for
another tort. Liability has been found only
where the conduct has been so outrageous in
character, and so extreme in degree, as to go
beyond all bounds of decency, and to be
regarded as atrocious, and utterly
intolerable in a civilized community.
Generally, the case is one in which the
recitation of the facts to an average member
of the community would arouse his resentment
against the actor, and lead him to exclaim,
Dunlea v. Dappen, 83 Haw. 28, 38, 924 P.2d 196,
206 (1996). “The question whether the actions
of the alleged tortfeasor are unreasonable or
outrageous is for the court in the first instance,
although where reasonable people may differ on
that question it should be left to the jury.”
Young v. Allstate Ins. Co., 119 Haw. 403, 429, 198
P.3d 666, 692 (2008).
Martin v. Ampco Sys. Parking, Civil No. 12-00598 SOM/RLP, 2013 WL
5781311, at *15-16 (D. Hawai`i Oct. 24, 2013), reconsideration
granted, 2013 WL 6624124 (Dec. 16, 2013).25
This district court has recognized that conduct meeting
the requisite outrageousness is not often found in cases arising
from foreclosure proceedings.
However, this district court has
concluded that some IIED claims based on foreclosure proceedings
Foreclosure proceedings generally do not rise
to the level of extreme and outrageous conduct to
support an IIED claim. In Doran v. Wells Fargo
Bank, No. 11–00132, 2011 WL 5239738, at *10–11 (D.
Haw. Oct. 31, 2011), for example, a plaintiff
alleged a claim for IIED based, in part, on
defendant cancelling his loan modification and
Dunlea was abrogated on other grounds by Hac v.
University of Hawai`i, 102 Hawai`i 92, 73 P.3d 46 (2003).
The Motion for Reconsideration is not relevant here. See
Martin, 2013 WL 6624124 at *1 (stating that the Motion for
Reconsideration relates to an allegedly illegal revocation of a
foreclosing upon his property. The defendant had
represented that plaintiff was pre-qualified for
the loan modification. The court dismissed the
IIED claim, as such conduct was not outrageous.
Doran, 2011 WL 5239738, at *11; see also Almaden
v. Peninsula Mortgage, Inc., No. 12–00390, 2012 WL
6738512, at *10 (D. Haw. Dec. 31, 2012)
(dismissing IIED claim alleging that defendant
lied about a loan modification and subsequently
foreclosed); Uy v. Wells Fargo Bank, N.A., No.
10–00204, 2011 WL 1235590, at *14 (D. Haw.
Mar. 28, 2011)); but see Bass v. Ameriquest Mortg.
Co., No. 09–00476, 2010 WL 3025167, at *10–11 (D.
Haw. Aug. 3, 2010) (denying summary judgment as to
an IIED claim where the plaintiff asserted that
the defendant “forged her signature on the 2006
loans, refused to honor [her] right of
cancellation of the loans when she discovered the
forgeries, and commenced foreclosure proceedings
against [her] when she failed to make her loan
Plaintiff here alleges that he has suffered
and continues to suffer emotional distress “[a]s a
direct, proximate and foreseeable result of the
AOAO’s . . . and Associa’s negligent or
intentional acts, which are outrageous.” (Am.
Compl. at ¶ 128.) Such generalized and conclusory
allegations fail to satisfy the requirements of
Federal Rule of Civil Procedure 8.
Plaintiff fails to allege the existence of
special circumstances that would support a claim
of outrageous conduct by Defendants AOAO and
Associa relating to the foreclosure of Plaintiff’s
Baham v. Ass’n of Apartment Owners of Opua Hale Patio Homes, Civ.
No. 13–00669 HG–BMK, 2014 WL 2761744, at *21–22 (D. Hawai`i
June 18, 2014) (alterations in Baham) (emphases added).
plaintiff can allege an IIED claim against a foreclosing
condominium association if he alleges special circumstances, such
In the instant case, Plaintiffs allege that, inter
alia: the AOAO had a $6,882.86 lien on their Unit; the AOAO
foreclosed on their Unit, intentionally using an expedited
foreclosure process that it was not legally entitled to use; at
the time of the AOAO’s foreclosure, it was aware that Plaintiffs
were in the process of selling the Unit; Plaintiffs had requested
a reasonable payment plan, under which they would pay all amounts
owed to the AOAO; Plaintiffs entered into a contract for the
Short Sale of the Unit; based on the pending Short Sale,
Plaintiffs reached a settlement with the holder of their first
mortgage – the original amount of which was $249,600 – and they
paid off their second mortgage – the original amount of which was
$62,400; the Short Sale ultimately did not close because of the
AOAO’s foreclosure sale; and the AOAO purchased the Unit at the
[Second Amended Complaint at ¶¶ 10-26.]
Court concludes that, at a minimum, reasonable minds could differ
on the issue of whether these alleged circumstances present the
type of special circumstances required to support an IIED claim
arising from a foreclosure.
Thus, the issue of whether the
AOAO’s conduct was outrageous should be left to the jury.
Young, 119 Hawai`i at 429, 198 P.3d at 692.
This Court therefore CONCLUDES that Plaintiffs have
sufficiently pleaded their IIED claim against the AOAO.
Motion is DENIED as to its request for dismissal of Plaintiffs’
IIED claim against the AOAO in Count V.
On the basis of the foregoing, the AOAO’s Amended
Motion to Dismiss Second Amended Complaint [Dkt 34], filed
August 24, 2016, is HEREBY DENIED in its entirety, and Chow’s
Motion to Dismiss [Dkt. 34] Second Amended Complaint, filed
October 31, 2016, is HEREBY GRANTED IN PART AND DENIED IN PART.
Specifically, the Chow Motion is GRANTED insofar as the Court
DISMISSES Plaintiffs’ claims against Chow in Counts I, III, IV,
and V WITH PREJUDICE.
This Court DENIES the Chow Motion as to
Plaintiffs’ claim against Chow in Count II.
This Court ORDERS Defendants to file their answers to
the Second Amended Complaint by April 20, 2017.
emphasizes that the deadline applies even if a motion for
reconsideration of this Order is filed.
Any motion for
reconsideration of this Order must be filed by April 17, 2017.
IT IS SO ORDERED.
DATED AT HONOLULU, HAWAII, March 30, 2017.
/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
RUDY AKONI GALIMA, ET AL. VS. ASSOCIATION OF APARTMENT OWNERS OF
PALM COURT, ET AL; CIVIL 16-00023 LEK-KSC; ORDER DENYING
DEFENDANT ASSOCIATION OF APARTMENT OWNERS OF PALM COURT’S AMENDED
MOTION TO DISMISS SECOND AMENDED COMPLAINT [DKT 34]; AND GRANTING
IN PART AND DENYING IN PART DEFENDANT BRYSON CHOW’S MOTION TO
DISMISS [DKT. 34] SECOND AMENDED COMPLAINT
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