Brown et al v. Porter McGuire Kiakona & Chow, LLP et al
Filing
95
ORDER DENYING DEFENDANT ASSOCIATION OF APARTMENT OWNERS OF TERRAZZA/CORTBELLA/LAS BRISAS/TIBURON'S MOTION TO DISMISS; DENYING DEFENDANT ASSOCIATION OF APARTMENT OWNERS OF KO OLINA KAI GOLF ESTATES AND VILLAS' MOTION FOR JUDGMENT ON THE PLEA DINGS; GRANTING IN PART AND DENYING IN PART DEFENDANT EKIMOTO & MORRIS, LLLC'S MOTION TO DISMISS; AND GRANTING IN PART AND DENYING IN PART DEFENDANT PORTER MCGUIRE KIAKONA & CHOW, LLP'S SUBSTANTIVE JOINDER IN THE E&M MOTION re 40 Mot ion to Dismiss; re 42 Motion to Dismiss for Failure to State a Claim; re 46 Motion for Judgment on the Pleadings; re 65 Motion for Joinder. Signed by JUDGE LESLIE E. KOBAYASHI on 08/30/2017. This Court GRANTS Plaintiffs leave to file an amended complaint that includes: Count I, as pled in the original Complaint; the claims that Plaintiffs alleged against the AOAO Defendants in Counts II and III of the original Complaint; an amended FDCPA coun t against the Law Firm Defendants which addresses the defect identified in this Order; and the class action allegations, which this Court did not address in this Order. Plaintiffs shall file their amended complaint by October 11, 2017. Because thi s Court has given Plaintiffs leave to file an amended complaint, the Terrazza AOAO and the Law Firm Defendants do not need to file answers to the original Complaint. Because this Court has not granted Plaintiffs leave to amend their claims against th e AOAO Defendants, the Terrazza AOAO and the Ko Olina AOAO must file their respective answers to the amended complaint by October 25, 2017, and they must obtain leave from this Court before filing any Rule 12 motions in lieu of their respective answe rs to the amended complaint. The Law Firm Defendants must file their respective answers to the amended complaint by November 1, 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
)
)
Plaintiffs,
)
)
vs.
)
)
)
PORTER MCGUIRE KIAKONA &
CHOW, LLP, a Hawaii limited
)
liability partnership, ET
)
AL.,
)
)
Defendants.
)
_____________________________ )
BENITA J. BROWN, ET AL.,
CIVIL 16-00448 LEK-KJM
ORDER DENYING DEFENDANT ASSOCIATION OF APARTMENT OWNERS OF
TERRAZZA/CORTBELLA/LAS BRISAS/TIBURON’S MOTION TO DISMISS;
DENYING DEFENDANT ASSOCIATION OF APARTMENT OWNERS OF
KO OLINA KAI GOLF ESTATES AND VILLAS’ MOTION FOR JUDGMENT
ON THE PLEADINGS; GRANTING IN PART AND DENYING IN PART
DEFENDANT EKIMOTO & MORRIS, LLLC’S MOTION TO DISMISS; AND
GRANTING IN PART AND DENYING IN PART DEFENDANT PORTER MCGUIRE
KIAKONA & CHOW, LLP’S SUBSTANTIVE JOINDER IN THE E&M MOTION
On August 10, 2016, Plaintiffs Benita J. Brown,
Craig Connelly and Kristine Connelly (collectively
“Plaintiffs”),1 filed their Class Action Complaint (“Complaint”).
[Dkt. no. 1.]
On September 28, 2016, Defendant Ekimoto & Morris,
LLLC (“E&M”) filed a motion to dismiss the Complaint (“E&M
Motion”), and Defendant the Association of Apartment Owners of
Terrazza/Cortbella/Las Brisas/Tiburon (“Terrazza AOAO”) filed its
motion to dismiss (“Terrazza AOAO Motion”) on September 29, 2016.
1
This case is a putative class action, but, until
Plaintiffs move for and obtain class certification, this Court
will only consider the claims that Plaintiffs bring as
individuals.
[Dkt. nos. 40, 42.]
On October 14, 2016, Defendant Porter
McGuire Kiakona & Chow, LLP (“PMKC”) filed a substantive joinder
in the E&M Motion (“PMKC Joinder” or “the Joinder”).
65.]
[Dkt. no.
On October 3, 2016, Defendant Association of Apartment
Owners of Ko Olina Kai Golf Estates and Villas (“Ko Olina AOAO”)
filed its Motion for Judgment on the Pleadings on Counts I-IV of
Plaintiffs’ Class Action Complaint, Filed August 10, 2016 (“Ko
Olina AOAO Motion”).2
[Dkt. no. 46.]
On March 30, 2017, this Court issued an order ruling on
the motions to dismiss in a case that presents substantively
similar issues and claims as those in the instant case, Galima v.
Ass’n of Apartment Owners of Palm Court, et al., CV 16-00023 LEKKSC (“Galima Order”).
2017 WL 1240181.
This Court ordered the
parties to file memoranda regarding whether the analysis in the
Galima Order applies in the instant case.
[Dkt. no. 76.]
E&M,
the Ko Olina AOAO, and the Terrazza AOAO filed their respective
memoranda on April 25, 2017.
[Dkt. nos. 80 (“E&M Galima Mem.”)
81 (“Ko Olina AOAO Galima Mem.”), 83 (“Terrazza AOAO Galima
Mem.”).]
Also on April 25, 107, PMKC filed a joinder in the E&M
Galima Memorandum (“PMKC Galima Joinder”).
[Dkt. no. 82.]
On
May 9, 2017, Plaintiffs filed their response to Defendants’
2
This Court will refer to the E&M Motion, the Terrazza AOAO
Motion, and the Ko Olina AOAO Motion collectively as “the
Motions.”
2
memoranda (“Plaintiffs’ Galima Memorandum”).3
[Dkt. no. 84.]
The Court finds these matters suitable for disposition
without a hearing pursuant to Rule LR7.2(d) of the Local Rules of
Practice of the United States District Court for the District of
Hawai`i (“Local Rules”).4
The Terrazza AOAO Motion and the Ko
Olina AOAO Motion are hereby denied, and the E&M Motion and the
PMKC Joinder are hereby granted in part and denied in part, for
the reasons set forth below.
BACKGROUND
Around August 2004, Plaintiff Benita J. Brown (“Brown”)
purchased Apartment No. 176 in the condominium project known as
“Las Brisas, Phase 15” in Ewa Beach, Hawai`i (“the Brown Unit”
and “Las Brisas”).
Brown obtained a loan to purchase the unit
that was secured by a mortgage on the unit (“Brown Mortgage”).
Las Brisas was managed by the Terrazza AOAO.
The Terrazza AOAO,
by and through PMKC,5 gave notice that it would sell the Brown
Unit at a public sale pursuant to the former Haw. Rev. Stat.
§§ 667-5 to 667-10 (“Chapter 667, Part I”).
The public sale was
3
This Court will refer to E&M, PMKC, the Ko Olina AOAO, and
the Terrazza AOAO collectively as “Defendants.”
4
This Court finds that neither further briefing nor a
hearing is necessary in these matters. This Court denies
Defendants’ requests for leave to submit further briefing and for
this Court to hold a hearing on the Motions and the Joinder.
5
PMKC is a law firm and a registered limited liability
partnership in Hawai`i. [Complaint at ¶ 11.]
3
conducted on or around May 20, 2011, and the Terrazza AOAO
submitted the winning bid.
The Terrazza AOAO executed a
quitclaim deed on June 9, 2011, and the deed was recorded on the
same date.
Brown lost her unit and remains liable for the
amounts secured by the Brown Mortgage.
[Complaint at ¶ 8.]
The
Terrazza AOAO has taken “possession, control, and enjoyment of
the [Brown Unit] and all of its benefits.”
[Id.]
Around August 2004, Plaintiffs Craig Connelly and
Kristine Connelly (“the Connellys”) purchased Apartment No. M36-4
in the condominium project known as “Ko Olina Kai Golf Estates &
Villas” in Kapolei, Hawai`i (“the Connelly Unit” and “Ko Olina”).
The Connellys obtained a loan to purchase the unit that was
secured by a mortgage on the unit (“Connelly Mortgage”).
Ko Olina was managed by the Ko Olina AOAO.
The Ko Olina AOAO, by
and through E&M,6 gave notice that it would sell the Connelly
Unit at a public sale pursuant to Chapter 667, Part I.
The
public sale was conducted on or around June 17, 2011, and the
Ko Olina AOAO submitted the winning bid.
The Ko Olina AOAO
executed a quitclaim deed on August 2, 2011, and the deed was
recorded on August 9, 2011.
The Connellys lost their unit and
remain liable for the amounts secured by the Connelly Mortgage.
[Id. at ¶ 9.]
The Ko Olina AOAO has taken “possession, control,
6
E&M is a law firm and a registered limited liability law
company in Hawai`i. [Complaint at ¶ 12.]
4
and enjoyment of the [Connelly Unit] and all of its benefits.”
[Id.]
The gravamen of the claims in the instant case is the
same as that of the claims in Galima – a condominium
association’s ability to use the nonjudicial process under the
former Chapter 667, Part I.
The Complaint in the instant case
alleges the following claims: a claim seeking a declaratory
judgment that 1) Defendants were not entitled to use Part I,
2) Defendants were required to use Haw. Rev. Stat. §§ 667-21
through 667-42 (“Chapter 667, Part II”), and 3) because they did
not use Part II, the foreclosures were wrongful (“Count I”); [id.
at ¶¶ 41-44;] a wrongful foreclosure claim against Defendants
(“Count II”); [id. at ¶¶ 45-49;] a claim against PMKC and E&M
(“the Law Firm Defendants”) for violations of the Fair Debt
Collections Practices Act (“FDCPA”), 15 U.S.C. § 1692, et seq.
(“Count III”); and a claim against Defendants for unfair or
deceptive acts or practices (“UDAP”) under Haw. Rev. Stat.
Chapter 480 (“Count IV”) [id. at ¶¶ 56-66].
Plaintiffs seek the following relief: compensatory,
statutory, treble, and punitive damages; restitution and
disgorgement of revenues; declaratory and injunctive relief; preand post-judgment interest; attorneys’ fees and costs; and any
other appropriate relief.
[Id. at Prayer for Relief ¶¶ C-H.]
The Law Firm Defendants seek the dismissal of all of
5
Plaintiffs’ claims against them with prejudice.
The Terrazza
AOAO also seeks the dismissal of all of Plaintiffs’ claims, and
the Ko Olina AOAO seeks judgment as matter of law as to all of
Plaintiffs’ claims.7
DISCUSSION
I.
Whether the Galima Analysis of Chapter 667, Part I Applies
In Galima, the defendants made the same argument that
Defendants make in the Motions and the Joinder – that the version
of Haw. Rev. Stat. § 514B-146(a) in effect at the time of the
challenged foreclosures allowed a condominium association to use
Chapter 667, Part I or Part II, regardless of whether the
association had an agreement with the condominium owner which
contained a power of sale provision.8
The Terrazza AOAO Motion is based on § 514B-146(a)
(2011).
See, e.g., Mem. in Supp. of Terrazza AOAO Motion at 3.
The Ko Olina AOAO Motion, the E&M Motion, and the PMKC Joinder
are based on Haw. Rev. Stat. § 514A-90(a) (2011).
See, e.g.,
7
The Ko Olina AOAO filed its answer to the Complaint on
September 29, 2016. [Dkt. no. 41.]
8
The Galima Order analyzed § 514B-146(a) (2010) because the
nonjudicial foreclosure sale of the Galimas’ unit occurred in
2010. Galima Order, 2017 WL 1240181, at *2. The nonjudicial
foreclosure sale of the Brown Unit occurred around May 20, 2011,
and the nonjudicial foreclosure sale of the Connelly Unit
occurred around June 17, 2011. [Complaint at ¶¶ 8-9.] Section
514B-146 was amended in 2011, and the amendments became effective
on May 5, 2011. However, amendments did not affect subsection
(a) of § 514B-146. 2011 Haw. Sess. Laws Act 48, § 14 at 103,
§ 45 at 117.
6
Mem. in Supp. of Ko Olina AOAO Motion at 2; E&M Motion at 3; PMKC
Joinder at 5.
For the reasons stated in the Galima Order, 2017
WL 1240181, at *3, this Court concludes that, for purposes of the
instant Motions and Joinder, § 514B-146 (2011) applies.
However,
this Court notes that § 514A-90(a) (2011) was substantially
similar to § 514B-146(a) (2011).
See Galima Order, 2017 WL
1240181, at *3 n.6 (noting that § 514A-90(a) (2010) was
substantially similar to § 514B-146(a) (2010)).9
In the Galima Order, this Court stated:
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 interpretation. 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.
2017 WL 1240181, at *9 (bold emphasis added).10
9
Section 514A-90 was amended in 2011, and the amendments
became effective on May 5, 2011. However, the amendments did not
affect subsection (a) of § 514A-90. 2011 Haw. Sess. Laws Act 48,
§ 13 at 102, § 45 at 117.
10
In Galima, the plaintiffs alleged that there was federal
question jurisdiction, pursuant to 28 U.S.C. § 1331, over the
FDCPA claim and either diversity jurisdiction, pursuant to 28
U.S.C. § 1332(a), or supplemental jurisdiction, pursuant to 28
U.S.C. § 1367(a), over the state law claims. Galima Order, 2017
WL 1240181, at *5. This Court therefore applied Hawai`i
(continued...)
7
A.
Section 514A-82(b)(13)
The Ko Olina AOAO and the Law Firm Defendants first
argue that Galima was wrongly decided because this Court failed
to consider the fact that every condominium association’s bylaws
contain a power of sale provision by operation of Haw. Rev. Stat.
§ 514A-82(b)(13).11
Section 514A-82(b) states, in pertinent
part:
10
(...continued)
substantive law to the state law claims and recognized that it
was bound by the Hawai`i Supreme Court’s decisions. However, to
the extent the supreme court had not addressed a particular issue
of Hawai`i law, this Court had to predict how the supreme court
would decide the issue. Id.
Similarly, Plaintiffs in the instant case allege that there
is federal question jurisdiction over the FDCPA claim, and either
diversity jurisdiction, pursuant to § 1332(d) – regarding class
actions – or supplemental jurisdiction over the state law claims.
[Complaint at ¶¶ 4, 6.] The principles regarding the application
of Hawai`i substantive law also apply in this case.
11
The current version of § 514A-82 is the same as the
version that was in effect in 2011. Chapter 514A applies to
condominiums created before July 1, 2006, with certain
exceptions, including when the provisions of Chapter 514B
identified in Haw. Rev. Stat. § 514B-22 apply. Haw. Rev. Stat.
§ 514A-1.5(a)(2)(A); see also Galima Order, 2017 WL 1240181, at
*3 (concluding that, based on § 514B-22(1), § 514B-146 (2010)
applied). This Court has concluded that, based on the Galima
analysis, § 514B-146 (2011) applies in this case. The other
provisions of Chapter 514A apply in this case because both Las
Brisas and Ko Olina were created in 2004. See Terrazza AOAO
Motion, Decl. of David R. Major (“Major Decl.”), Exh. B
(Declaration of Condominium Property Regime of Las Brisas, Phase
15 (“Las Brisas Declaration”), dated July 1, 2004, and recorded
on July 8, 2004); Ko Olina AOAO Motion, Decl. of David J. Minkin,
Exh. B (Declaration of Condominium Property Regime of Ko Olina
Kai Golf Estates and Villas (“Ko Olina Declaration”), dated March
24, 2004, and recorded on April 29, 2004); see also
infra judicial notice discussion regarding the Las Brisas and
Ko Olina bylaws.
8
In addition to the requirements of subsection (a),
the bylaws shall be consistent with the following
provisions:
. . . .
(13) A lien created pursuant to section 514A90 may be enforced by the association in any
manner permitted by law, including
nonjudicial or power of sale foreclosure
procedures authorized by chapter 667; and
. . . .
The provisions of this subsection shall be deemed
incorporated into the bylaws of all condominium
projects existing as of January 1, 1988, and all
condominium projects created after that date.
Defendants do not cite any case in which a court has applied
§ 514A-82(b)(13) in the broad manner Defendants suggest here, and
this Court has been unable to find any.
In this Court’s view, it is clear from a plain language
reading of § 514A-82(b)(13) that a condominium association may
enforce its lien as “permitted by law,” including the use of the
nonjudicial foreclosure process, when it is “authorized by
chapter 667.”
(Emphases added.)
In other words, the authority
to enforce a condominium association’s lien – which is
automatically incorporated by operation of law into all
condominium associations’ bylaws – is the same authority that is
described in Chapter 667.
Section 514A-82(b)(13) does not grant
condominium associations any greater rights than those that exist
under Chapter 667.
9
In the Galima Order, this Court noted:
[Section] 514B-146(a) (2010) . . . stated that the
condominium’s foreclosure pursuant to Chapter 667
had to be “in like manner as a mortgage of real
property.” 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 . . . .” (Emphasis
added.) The Hawai`i Supreme Court [in Santiago v.
Tanaka, 137 Hawai`i 137, 154–55, 366 P.3d 612,
629–30 (2016),12] has construed this language as
requiring an agreed upon power of sale in a
mortgage in order to invoke the § 667-5 (2010)
procedures.
2017 WL 1240181, at *6 (emphases and some alterations in
Galima).13
Ultimately, this Court concluded 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.”
B.
Id. at *7.
Legislative History of Relevant Condominium Statutes
The Ko Olina AOAO and the Law Firm Defendants also
argue that Galima was wrongly decided because, while this Court
considered the legislative history of Chapter 667, it did not
consider the legislative history of the condominium laws –
Chapters 514A and 514B.
First, in Galima, this Court recognized
12
The United States Supreme Court denied the application
for a writ of certiorari. Tanaka v. Santiago, 137 S. Ct. 198
(2016).
13
Section 667-5(a) (2011) contains the same language that
this Court relied upon in the Galima analysis.
10
that, in interpreting a provision of the Hawai`i Revised
Statutes: its first duty was to look at the statute’s plain
language; id. at *7 n.11; and it only considered legislative
intent when the statute’s language was ambiguous, id. at *7 n.12.
Second, this Court’s conclusion that a condominium association
could not use Chapter 667, Part I to foreclose upon its lien when
it did not have an agreement with a power of sale was based on “a
plain language reading” because “the statutes in question (as
interpreted by the Hawai`i Supreme Court) [we]re unambiguous.”
Id. at *7.
This Court expressly stated that it could stop its
analysis there, but went on to discuss “the legislative intent
behind the 2010 versions of the statutes in question” because the
legislative intent was consistent with this Court’s
interpretation of Chapter 667.
Id.
Thus, the conclusion in
Galima was not dependent upon the legislative history of Chapter
667, and its discussion of that legislative history did not
require it to discuss the legislative history of Chapters 514A
and 514B.
None of the relevant sections of Chapters 514A and
514B were found to be ambiguous and, therefore, the argument that
Galima was wrongly decided because this Court failed to look at
the legislative history of Chapters 514A and 514B is soundly
rejected.
Although the plain language of the relevant statutes is
unambiguous, this Court has the discretion to consider the
11
legislative history of Chapters 514A and 514B.
See Friends of
Makakilo v. D.R. Horton-Schuler Homes, LLC, 134 Hawai`i 135, 139,
338 P.3d 516, 520 (2014) (“Yet, even if the plain language of a
statute is clear, this court can nevertheless consider
legislative history to ensure its interpretation of the statute
does not produce an absurd result contrary to legislative
intent.” (emphasis added)).
However, even if the legislative
history presented in this case was considered,14 the Galima
analysis remains unchanged.
In particular, the Ko Olina AOAO and
the Law Firm Defendants urge this Court to consider Act 236,
which enacted subsection (13) of § 514A-82(b) and amended § 514A90(a)(2) to add the “or by nonjudicial or power of sale
foreclosure procedures set forth in chapter 667.”
See 1999 Haw.
Sess. Laws Act 236, § 3 at 725-27, § 4 at 727-29.
Act 236
states:
14
The Ko Olina AOAO and the Law Firm Defendants make
various unsupported statements about the circumstances they
assert gave rise to the relevant legislative actions. See, e.g.,
E&M Galima Mem. at 7 (“condominium associations were in a very
difficult position financially after 6-7 years of an economic
downturn” and “judicial foreclosures by the lender often took a
year or more to complete, and in the end the association’s lien
for maintenance fees was typically wiped out because the
foreclosure auction price was insufficient to pay off even the
lender’s first mortgage lien”); id. at 10 (discussing lobbying
efforts by condominium associations in 1999). Even if proper
documentation had been provided to support their statements, such
information is not permissibly considered in a motion to dismiss.
This Court has only considered the contents of Act 236, and the
committee reports that preceded the passage of the act.
12
The legislature finds that associations of
apartment owners are increasingly burdened by the
costs and expenses connected with the collection
of delinquent maintenance and other common
expenses.
The legislature further finds that the number
of foreclosures in this State has greatly
increased, and that associations of apartment
owners are often required to bear an unfair share
of the economic burden when purchasers in
foreclosure actions exercise rights of ownership
over purchased apartments without paying their
share of common maintenance fees and assessments.
The legislature further finds that more
frequently associations of apartment owners are
having to increase maintenance fee assessments due
to increasing delinquencies and related
enforcement expenses. This places an unfair
burden on those non-delinquent apartment owners
who must bear an unfair share of the common
expenses, and is particularly inequitable when a
delinquent owner is also an occupant who has
benefited [sic] from the common privileges and
services.
The legislature further finds that there is a
need for clarification regarding the authority of
associations of apartment owners to use nonjudicial and power of sale foreclosure procedures
to enforce liens for unpaid common expenses.
The legislature further finds that there is a
need for clarification as to where associations of
apartment owners may deposit or hold their funds,
and how they may invest their funds.
The purpose of this Act is to:
(1) Allow associations of apartment owners to
collect delinquent maintenance and common expenses
directly from the tenant of a delinquent owner;
(2) Clarify the law by specifying when a
purchaser in a foreclosure action becomes
responsible for assessments and maintenance fees;
13
(3) Allow associations of apartment owners the
alternative remedy for collecting fees and
expenses from delinquent owner-occupants by
withholding common privileges and terminate common
services to owner-occupied apartments until the
delinquent sums are paid;
(4) Clarify that associations of apartment owners
may enforce liens for unpaid common expenses by
non-judicial and power of sale foreclosure
procedures, as an alternative to legal action;
(5) Specify where and in what types of
investments associations of apartment owners may
place their funds.
Id., § 1 at 723-24 (emphasis added).
The Law Firm Defendants
argue that § 514A-82(b)(13) is “remedial legislation” that
“should be construed liberally in favor of creating a power of
sale in the bylaws.”
[E&M Galima Mem. at 18.]
While the Law Firm Defendants are correct that
“[r]emedial statutes are liberally construed to suppress the
[perceived] evil and advance the [enacted] remedy,” see Cieri v.
Leticia Query Realty, Inc., 80 Hawai`i 54, 68, 905 P.2d 29, 43
(1995) (some alterations in Cieri) (citations and quotation marks
omitted), they fail to cite any case supporting their
characterization of § 514A-82(b)(13) as a remedial statute, nor
any law characterizing Chapters 514A or 514B as a remedial
statute.
This Court is simply not aware of any.
The Hawai`i
Supreme Court has stated: “Generally, remedial statutes are those
which provide a remedy, or improve or facilitate remedies already
existing for the enforcement of rights and the redress of
14
injuries.”
Kalima v. State, 111 Hawai`i 84, 100, 137 P.3d 990,
1006 (2006).
Simply put, finding that § 514A-82(b)(13) is a
remedial statute because the Legislature sought to facilitate
condominium associations’ use of the existing lien foreclosure
remedy would be an impermissibly broad application which could
lead to almost every statute that the Legislature amends being
characterized as a “remedial statute.”
This is inconsistent with
the limited type of statutes that the Hawai`i courts have
characterized as remedial.
See, e.g., Davis v. Four Seasons
Hotel Ltd., 122 Hawai`i 423, 430, 228 P.3d 303, 310 (2010)
(characterizing Haw. Rev. Stat. Chapter 480, titled “Monopolies;
Restraint of Trade,” as remedial); Kalima, 111 Hawai`i at 100,
137 P.3d at 1006 (Haw. Rev. Stat. Chapter 674);15 Furukawa v.
Honolulu Zoological Soc’y, 85 Hawai`i 7, 17, 936 P.2d 643, 653
(1997) (Haw. Rev. Stat. Chapter 378, titled “Employment
Practices”); Dawes v. First Ins. Co. of Hawai`i, 77 Hawai`i 117,
122–23, 883 P.2d 38, 43–44 (1994) (uninsured motors statutes like
Haw. Rev. Stat. § 431:10C-301(b)(3)); Castro v. Melchor, 137
Hawai`i 179, 189–90, 366 P.3d 1058, 1068–69 (Ct. App. 2016) (Haw.
15
Chapter 674 “establishes a ‘process under which
individual beneficiaries under the Hawaiian home lands trust may
resolve claims for actual damages,’ for past breaches of trust.”
Kalima, 111 Hawai`i at 100, 137 P.3d at 1006 (quoting Haw. Rev.
Stat. § 674–1).
15
Rev. Stat. § 663-3),16 cert. granted, No. SCWC-12-0000753, 2016
WL 3218858 (Hawai`i June 9, 2016).
Section 514A-82(b)(13) is
dissimilar to the types of statutes that the Hawai`i courts have
held to be remedial.
This Court therefore predicts that the
Hawai`i Supreme Court would reject the argument that § 514A82(b)(13) is a remedial statute.
The Legislature did expressly clarify that condominium
associations could use “non-judicial and power of sale
foreclosure procedures, as an alternative to legal action.”
1999 Haw. Sess. Laws Act 236, § 1 at 724.
See
It did so by adding
the language “or by non-judicial or power of sale foreclosure
procedures set forth in chapter 667” to § 514A-90(a).
at 727.
Id., § 4
Significantly, it did not change the language “in like
manner as a mortgage of real property.”
Id.
These amendments to
§ 514A-90(a), coupled with the addition of § 514A-82(b)(13) –
with its “any manner permitted by law” and “authorized by chapter
667” language – do not evince a clear legislative intent to
create a legal scheme that incorporated a power of sale into
every condominium association’s bylaws.
Such a scheme would
automatically allow every association to utilize the nonjudicial
or power of sale process, arguably giving any association lien
16
Section 663-3 “creates a statutory right for nondependent relatives to sue for wrongful death, a right which did
not exist under common law.” Castro, 137 Hawai`i at 189, 366
P.3d at 1068.
16
for unpaid assessments priority over any mortgage on the unit,
because any condominium association could utilize Chapter 667,
Part I, whereas the mortgagee could only use Part I if it had an
agreed upon power of sale.
The Ko Olina AOAO and the Law Firm Defendants’
legislative history argument is contrary to the plain language of
§ 514A-82(b)(13) and § 514A-90(a)/§ 514B-146(a).
In order to
conclude that a statute’s legislative intent overrides the
statute’s plain language, there must be a “clear statement of
intent.”
Peer News LLC v. City & Cty. of Honolulu, 138 Hawai`i
53, 69, 376 P.3d 1, 17 (2016); see also State v. Savitz, 97
Hawai`i 440, 444, 39 P.3d 567, 571 (2002) (“Absent strong
legislative history to the contrary, we follow the plain language
of the statute.”).
No clear statement of intent exists here to
make each condominium association automatically eligible to use
the nonjudicial/power of sale foreclosure process by creating a
power of sale in each association’s bylaws.
In fact, the
defense’s interpretation appears to be contrary to the
Legislature’s intent behind Act 236.
See, e.g., H. Stand. Comm.
Rep. No. 1738, in 1999 House Journal, at 1706 (identifying one of
the purposes of Senate Bill 36 as “[p]roviding the association a
limited lien priority over mortgages to collect unpaid common
assessments” (emphasis added)); S. Stand. Comm. Rep. No. 845, in
1999 Senate Journal, at 1297 (noting that the committee amended
17
Senate Bill 36 by “[g]iving judicial foreclosure actions priority
over actions by the association to make collections”).
The
legislative history of Act 236 indicates that the Legislature
allowed condominium associations to use the nonjudicial or power
of sale foreclosure process when their use of the process was
consistent with Chapter 667.
The Ko Olina AOAO and the Law Firm Defendants also
argue that, when the Legislature passed Act 236, it intended to
allow every condominium association to utilize Chapter 667,
Part I because Part II was essentially unusable.
Haw. Rev. Stat.
§ 667-31(a) (1999) stated:
After the purchaser completes the purchase by
paying the full purchase price and the costs for
the purchase, the mortgaged property shall be
conveyed to the purchaser by a conveyance
document. The conveyance document shall be in a
recordable form and shall be signed by the
foreclosing mortgagee in the foreclosing
mortgagee’s name. The mortgagor or borrower shall
sign the conveyance document on his or her own
behalf.
(Emphasis added.)
The Ko Olina AOAO argues that “Part II was
completely untenable because the whole process could be thwarted
at the very end by the delinquent member’s refusal to sign the
conveyance document.”
[Ko Olina AOAO Galima Mem. at 10.]
Practically speaking, this difficulty was likely part of the
reason why the Legislature passed Act 236 and clarified that
condominium associations could use the nonjudicial/power of sale
foreclosure process.
However, this problem with § 667-31(a) is
18
not evidence that the Legislature specifically addressed
associations’ use of the nonjudicial/power of sale foreclosure
process by incorporating a power of sale in every association’s
bylaws.
Again, the Ko Olina AOAO and the Law Firm Defendants’
legislative history argument is contrary to the plain language of
§ 514A-82(b)(13) and § 514A-90(a)/§ 514B-146(a), and Act 236 does
not provide the “clear statement of intent” necessary to override
the plain language of those statutes.17
Having considered the legislative history of Chapters
514A and 514B, there is no clear statement of intent sufficient
to override the plain language of the relevant statutes.
Further, the legislative history does not indicate that this
Court’s interpretation of the relevant statutes leads to absurd
results.
Thus, the legislative history of Chapters 514A and 514B
does not require departure from the Galima analysis.
17
The argument that § 514A-82(b)(13) must be interpreted to
include a power of sale in every set of bylaws is even less
persuasive as to Plaintiffs. In 2011, the Legislature amended
§ 667-31(a) and changed the last sentence to read: “The mortgagor
or borrower shall not be required to sign the conveyance
document.” 2011 Haw. Sess. Laws Act 48, § 29 at 112-13. As E&M
acknowledges, this amendment “eliminated” the “fatal flaw” in
§ 667-31(a). [E&M Galima Mem. at 9.] The amendment to § 66731(a) took effect upon the approval of Act 48 on May 5, 2011.
2011 Haw. Sess. Laws Act 48, § 45 at 117. The foreclosure sales
of the Brown Unit and the Connelly Unit occurred after May 5,
2011. [Complaint at ¶¶ 8-9.] Thus, Brown and the Connellys were
not required to sign the respective conveyance document, and
Defendants could have used the Chapter 667, Part II (2011)
process to foreclose.
19
For all of the foregoing reasons, the analysis of
Chapter 667, Part I in Galima is reaffirmed and is applied in
this case.
To the extent that the Motions and the Joinder ask
for a conclusion that condominium associations could freely elect
between the Chapter 667, Part I foreclosure procedure and the
Part II procedure, the Motions and the Joinder are denied.
II.
Whether the Galima Analysis is Satisfied
Defendants argue that Galima did not reach the issue of
whether the relevant condominium documents contained an agreed
upon power of sale.
They contend that the relevant condominium
documents in this case contain agreed upon power of sale
provisions.
A condominium’s governing documents “are contractual
obligations” between the condominium association and a
condominium owner.
See Lawson v. Ass’n of Apartment Owners of
Wailea Point Vill., CIVIL NO. 15-00449 DKW-KSC, 2016 WL 7493618,
at *10 (D. Hawai`i Dec. 30, 2016) (agreeing “that the Governing
Documents are contractual obligations that concern the same
subject matter as the [plaintiffs’] promissory estoppel claim”
and concluding that, because the [plaintiffs] had a legal remedy
against the [condominium association] for breach of the
condominium’s declaration, they could not pursue a promissory
estoppel claim).
In Lawson, the district court referred to the
condominium’s declaration, bylaws, and house rules as the
20
governing documents.
Id. at *1.
For purposes of the Motions and
the Joinder, Ko Olina’s and Las Brisas’s declaration of
condominium property regime and bylaws are referred to as each
condominium’s respective “Governing Documents.”18
E&M also
submitted the Apartment Deed, Encumbrances and Reservations of
Rights for Ko Olina Kai Golf Estates and Villas for the Connelly
Unit (“Connelly Deed”), and the Terrazza AOAO submitted the Las
Brisas, Phase 15 Apartment Deed for the Brown Unit (“Brown Deed,”
collectively “the Deeds”).
[Olson Decl., Exh. 4; Major Decl.,
Exh. A.]
As a general rule, the scope of review in considering a
motion to dismiss is limited to the allegations in the complaint.
See Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 998 (9th
Cir. 2010).
Consideration of other materials ordinarily requires
the district court to convert a motion to dismiss into a motion
for summary judgment.
Yamalov v. Bank of Am. Corp., CV. No.
10–00590 DAE–BMK, 2011 WL 1875901, at *7 n.7 (D. Hawai`i May 16,
2011) (citing Parrino v. FHP, Inc., 146 F.3d 699, 706 n.4 (9th
18
The Bylaws of Association of Apartment Owners of Ko Olina
Kai Golf Estates and Villas (“Ko Olina Bylaws”) and the Ko Olina
Declaration are attached to the E&M Motion as Exhibits 5 and 6,
respectively, to the Declaration of Peter W. Olson (“Olson
Declaration”). [Dkt. nos. 80-3, 80-4.] The Las Brisas
Declaration and the By-laws of the Association of Apartment
Owners of Las Brisas, Phase 15 (“Las Brisas Bylaws”) are attached
to the Major Declaration as Exhibits B and C, respectively.
[Dkt. nos. 83-3, 83-4.]
21
Cir. 1998)).19
However, “a court may consider evidence on which
the complaint necessarily relies if: (1) the complaint refers to
the document; (2) the document is central to the plaintiff’s
claim; and (3) no party questions the authenticity of the copy
attached to the 12(b)(6) motion.”
Daniels-Hall, 629 F.3d at 998
(citations and internal quotation marks omitted).
subject to judicial notice may also be considered.
Matters
Cf. Thomas v.
Fin. Recovery Servs., No. EDCV 12–1339 PSG (Opx), 2013 WL 387968,
at *2 (C.D. Cal. Jan. 31, 2013) (“It is well-settled that . . .
matters that are subject to judicial notice may also be
considered in evaluating a motion for judgment on the pleadings.”
(citing Buraye v. Equifax, 625 F. Supp. 2d 894, 896–97 (C.D. Cal.
2008); Amfac Mortg. Corp. v. Ariz. Mall of Tempe, Inc., 583 F.2d
426, 429–30 & n.2 (9th Cir. 1978))).
First, the Complaint does not refer to either the
Governing Documents or the Deeds, and – to the extent that
Defendants seek to establish that the Terrazza AOAO and the Ko
Olina AOAO20 each had a power of sale – the documents are central
to a defense, not to Plaintiffs’ claims.
The Governing Documents
and the Deeds therefore do not constitute evidence upon which the
19
Parrino was superseded by statute on other grounds, as
stated in Abrego Abrego v. The Dow Chemical Co., 443 F.3d 676,
681-82 (9th Cir. 2006) (per curiam).
20
The Terrazza AOAO and the Ko Olina AOAO are referred to
collectively as “the AOAO Defendants.”
22
Complaint necessarily relies.
Second, this Court “may take judicial notice of court
filings and other matters of public record.”
Reyn’s Pasta Bella,
LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006).
Arguably, because Defendants ask to consider the contents of the
Governing Documents and the Deeds – as opposed to the fact that
those documents were publicly recorded on certain dates,
consideration of those documents would require the conversion of
the Motions into motions for summary judgment.
See, e.g., Hirota
v. Gen. Nutrition Corp., CIVIL 15-00191 LEK-KSC, 2015 WL 6673688,
at *2–3 (D. Hawai`i Oct. 29, 2015) (noting that this Court could
take judicial notice of the docket in the plaintiffs’ bankruptcy
proceedings and filing of specific documents, but converting the
motion to dismiss into a motion for summary judgment because “it
[was] necessary to consider the contents of the [plaintiffs’]
filings in the Bankruptcy Court, not only the Bankruptcy Court’s
rulings or the fact that the [plaintiffs] filed certain
documents”).
However, Plaintiffs do not challenge the
authenticity of the submitted copies of the Governing Documents
and the Deeds.
See Pltfs.’ Galima Mem. at 2-3 n.2 (arguing that
the submission of the exhibits was “inappropriate and improper”
but arguing that “the Court’s review of Defendants’ exhibits will
only strengthen the argument that Defendants’ acts were unfair,
deceptive, and wrongful”).
Judicial notice therefore is taken of
23
the Governing Documents and the Deeds, and it is unnecessary to
convert the Motions into motions for summary judgment.
Brown agreed to comply with, and accepted, the Las
Brisas Bylaws, and the Connellys agreed to comply with, and
accepted, the Ko Olina Bylaws.
Deed at 5.]
[Brown Deed at 6-7, § 4; Connelly
The Las Brisas Bylaws state: “Upon recordation of a
duly executed original or copy of [a] lien [for an owner’s
default on assessment obligations], the Board shall have all
remedies provided in the Act.”21
art. VI, § 4(c).]
[Las Brisas Bylaws at 33,
Similarly, the Ko Olina Bylaws state: “Upon
recordation of a duly executed original or copy of such notice of
lien at the Office, the Board shall have all remedies provided in
the Act.”22
[Ko Olina Bylaws at 27, art. VI, § 4(b).]
Plaintiffs agreed to the terms regarding enforcement of
liens for delinquent assessments.
However, these provisions do
not grant the respective AOAOs powers of sale but merely confirm
that the AOAO Defendants can exercise the remedies available in
21
“‘Board’ means the Board of Directors of the Association
of Apartment Owners.” [Las Brisas Bylaws at 2, art. I, § 1(e).]
“The ‘Act’ means the Condominium Property Act, Chapter 514A,
Hawaii Revised Statutes (1978), as amended.” [Id., § 1(h).]
22
“Office,” “Board,” and “Act” are defined in the Ko Olina
Declaration. [Ko Olina Bylaws at 2, art. I, § 3.] “‘Office’
means the Office of the Registrar of the Land Court of the State
of Hawaii.” [Ko Olina Decl. at 6, § I.B.31.] “‘Board means the
Board of Directors of the” Ko Olina AOAO. [Id. at 3, § I.B.5-6.]
“Act” is defined as Chapter 514A, as amended. [Id. at 2; id. at
3, § I.B.1.]
24
Chapter 514A – and Chapter 514B, to the extent it later replaced
Chapter 514A.
The AOAO Defendants could enforce their liens
pursuant to § 514B-146(a) (2011), which was substantively
identical to § 514B-90(a) (2011).
Defendants have not identified
any other provision in the applicable Deed or the Governing
Documents that granted the respective AOAO a power of sale.
The
Complaint also alleges that neither the Terrazza AOAO nor the Ko
Olina AOAO had a power of sale.
[Complaint at ¶ 21.]
For
purposes of the instant Motions and Joinder, neither the Terrazza
AOAO nor the Ko Olina AOAO had an agreed upon power of sale, and
therefore Defendants have not satisfied the Galima analysis.
Count I – which seeks a declaratory judgment that
Defendants’ foreclosures of Plaintiffs’ units under Chapter 667,
Part I were not proper and that Part II applied – states a
plausible claim for relief.
See 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))).
The Motions and the Joinder are therefore denied as to
Count I.23
23
The Law Firm Defendants’ argument that Galima requires
the dismissal of Count I against them is rejected. Galima did
not have a claim for a declaratory judgment.
25
III. Count II – Wrongful Foreclosure
A.
The Law Firm Defendants
For the reasons stated in the Galima Order, Plaintiffs
cannot pursue a wrongful foreclosure claim against the Law Firm
Defendants.
2017 WL 1240181, at *10-11.
The E&M Motion and the
PMKC Joinder are therefore granted insofar as Plaintiffs’ claims
in Count II against the Law Firm Defendants are dismissed with
prejudice.
B.
The AOAO Defendants
Plaintiffs’ Complaint alleges that, although Defendants
gave notice and conducted the public sale of the Brown Unit and
the Connelly Unit pursuant to Chapter 667, Part I, they were
required to use Chapter 667, Part II because the AOAO Defendants
did not have powers of sale.
[Complaint at ¶¶ 8-9, 21.]
Plaintiffs allege that they suffered damages because of the AOAO
Defendants’ wrongful use of Chapter 667, Part I because, had the
AOAO Defendants complied with Chapter 667, Part II, Plaintiffs
would not have lost their respective units.
[Id. at ¶ 23.]
These allegations are sufficient to state the elements of
wrongful foreclosure claims against the AOAO Defendants.
The Terrazza AOAO argues that Plaintiffs are improperly
attempting to relitigate issues that Plaintiffs should have
raised in response to the foreclosure process, which was more
than five years before the filing of the Complaint.
26
To the
extent that the Terrazza AOAO alleges that Count II should be
dismissed as untimely, the argument is rejected for the reasons a
similar argument was rejected in Galima.
See Galima Order, 2017
WL 1240181, at *10.
Because Plaintiffs have sufficiently pleaded the
elements of their wrongful foreclosure claims against the AOAO
Defendants, and this Court concludes – for purposes of the
Terrazza AOAO Motion and the Ko Olina AOAO Motion only – that the
claim is timely, the Terrazza AOAO Motion and the Ko Olina AOAO
Motion are denied as to Plaintiffs’ claims against the AOAO
Defendants in Count II.24
IV.
Count III – UDAP Claim
A.
The Law Firm Defendants
For the reasons stated in the Galima Order, Plaintiffs
cannot pursue a UDAP claim against the Law Firm Defendants.
WL 1240181, at *14-15.
2017
The E&M Motion and the PMKC Joinder are
therefore granted insofar as Plaintiffs’ claims in Count III
against the Law Firm Defendants are dismissed with prejudice.
B.
The AOAO Defendants
1.
Standing
The Court first turns to the argument that Plaintiffs
24
To the extent that the AOAO Motion raises any other
arguments regarding Count II that are not expressly addressed in
this section, those arguments are also rejected.
27
lack standing to bring a UDAP claim against the AOAO Defendants.
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.”
Haw. Rev. Stat. § 480-1.
Plaintiffs are natural persons.
Brown purchased her
unit for $270,000 and obtained a $262,000 loan to do so.
[Complaint at ¶ 8.]
The Connellys purchased their unit for
$830,000 and obtained a $625,000 loan to do so.
[Id. at ¶ 9.]
Plaintiffs allege that they paid these monies, as well as the
monies the AOAO Defendants collected for condominium management
and maintenance services, for personal investment.
¶ 59.]
[Id. at
Taking these factual allegations to be true, see Twombly,
550 U.S. at 572 (“a judge ruling on a defendant’s motion to
dismiss a complaint must accept as true all of the factual
allegations contained in the complaint” (citations and internal
quotation marks omitted)), the allegations support a reasonable
28
inference that Plaintiffs are consumers for purposes of § 480-1.
See Cieri, 80 Hawai`i at 67, 905 P.2d at 42.
2.
Trade or Commerce
For the reasons stated in the Galima Order, the AOAO
Defendants’ placement of liens on Plaintiffs’ respective units
for unpaid assessments and their foreclosures of those liens
occurred in the business context, and the AOAO Defendants’
conduct may give rise to a UDAP claim.
See 2017 WL 1240181, at
*15.
3.
Timeliness
A four-year statute of limitations applies to
Plaintiffs’ UDAP claims against the AOAO Defendants, and the
period started to run when the AOAO Defendants’ alleged
violations occurred.
See id. at *15-16 (citing Lowther v. U.S.
Bank, N.A., 971 F. Supp. 2d 989, 1008 (D. Hawai`i 2013)).
The
public foreclosure sale of the Brown Unit occurred on or about
May 20, 2011, and the sale of the Connelly Unit occurred on or
about June 17, 2011.
The quitclaim deed for the Brown Unit was
recorded on June 9, 2011, and the quitclaim deed for the Connelly
Unit was recorded on August 9, 2011.
[Complaint at ¶¶ 8-9.]
Even assuming that the nonjudicial foreclosure processes were not
complete until, and the alleged UDAP violations ended on, those
dates, Plaintiffs failed to bring this action within four years
of the date the respective quitclaim deeds were recorded.
29
Thus,
Plaintiffs’ UDAP claims against the AOAO Defendants are timebarred unless the limitations periods may be tolled.
As in Galima, Plaintiffs contend that the statute of
limitations periods were tolled because Defendants fraudulently
concealed the fact that the AOAO Defendants were not authorized
to foreclose under Chapter 667, Part I.
Plaintiffs allege:
24. Defendants fraudulently concealed the
wrong they were committing by implying, stating,
and/or representing that they were authorized to
conduct nonjudicial foreclosures or public sales
under Part I.
25. Under Hawai`i law, a condominium
association has a fiduciary relationship with its
members. Given the special relationship between
the homeowner associations that comprise the
defendant class and plaintiffs who are members of
those associations, plaintiffs were entitled to
rely on and did rely on the statements and
representations made by defendants concerning
defendants’ right to conduct public sales under
Part I.
. . . .
27. Plaintiffs did not discover the claims
against defendants that they assert herein until
May of 2016.
[Complaint at ¶¶ 24-25, 27.]
For the reasons stated in the
Galima Order,25 Plaintiffs have pleaded sufficient factual
allegations to support a reasonable inference that equitable
25
See Galima Order, 2017 WL 1240181, at *13-14 (discussing
equitable tolling of the statute of limitations for the
plaintiffs’ FDCPA claim); id. at *16 (concluding, for the same
reasons, that the plaintiffs pled a sufficient basis to support
tolling of their UDAP claim against the condominium association).
30
tolling applies based on fraudulent concealment; and determining
the merits of Plaintiffs’ position will involve mixed issues of
law and fact that cannot be decided in a motion to dismiss.
See
Iqbal, 556 U.S. at 678 (“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.” (citing Twombly, 550 U.S. at 556, 127 S. Ct.
1955)).
The Terrazza AOAO Motion and the Ko Olina AOAO Motion
as to Plaintiffs’ UDAP claims against the AOAO Defendants in
Count III are therefore denied.
V.
Count IV – FDCPA Claim
The Law Firm Defendants argue that Plaintiffs’ FDCPA
claims against them fail as a matter of law because “‘[n]onjudicial foreclosures are not “actions to collect debt” (at least
for purposes of the FDCPA,’” and, “in the context of condominium
association foreclosures, this Court has held that ‘a nonjudicial
foreclosure is not an attempt to collect a debt for purposes of
the FDCPA.’”
[Mem. in Supp. of E&M Motion at 35 (quoting Araki
v. One W. Bank FSB, 2010 WL 5625969, at *6 (D. Haw. 2010);
Kitamura v. AOAO of Lihue Townhouse, 2013 WL 1398058, at *4 (D.
Haw. 2013) (Kobayashi, J.)).]
This Court rejected similar
arguments in Galima because an attorney representing a
condominium association in a nonjudicial foreclosure is not
31
necessarily in the same position as a foreclosing
lender/mortgagee or the condominium association itself.
See
Galima Order, 2017 WL 1240181, at *11-12.
In the instant case, Plaintiffs allege that “at all
times relevant herein, Law Firm Defendants . . . routinely
demanded sums of money and attempted to collect said sums of
money by sending letters and publishing notices falsely stating
that they were authorized to use Part I to collect delinquent
homeowner assessments.”
[Complaint ¶ 52.]
As in the Galima
Order, 2017 WL 1240181, at *13, Plaintiffs have sufficiently
alleged that the Law Firm Defendants are “debt collectors” for
purposes of the FDCPA.
In Galima, however, the plaintiffs included allegations
that the condominium association’s lien was for $6,882.86, and
they purchased their unit for approximately $312,000.00.
*12.
Id. at
Based upon the reasonable inferences from the Galimas’
factual allegations, this Court concluded the Galimas pled a
plausible claim that the purpose of the condominium association’s
nonjudicial foreclosure was to collect its debt for unpaid
assessments, not to transfer interest in the Galimas’ unit.
Id.
In the instant case, although Plaintiffs have included factual
allegations about the purchase prices, and the amount of the
loans they obtained to purchase, their respective units,
[Complaint at ¶¶ 8-9,] the Complaint is silent, however, about
32
the amount of the AOAO Defendants’ respective liens for unpaid
assessments.
Nor are other factual allegations made that would
support a reasonable inference about the purpose of the
nonjudicial foreclosures.
Plaintiffs therefore have failed to
plead a plausible claim that the purpose of the Terrazza AOAO’s
nonjudicial foreclosure of the Brown Unit and the Ko Olina AOAO’s
nonjudicial foreclosure of the Connelly Unit were to collect
their respective debts, not to transfer interest in the units.
Plaintiffs’ FDCPA claims must be dismissed because they fail to
state plausible claims for relief.
The Law Firm Defendants contend that the dismissal
should be with prejudice.
“As a general rule, dismissal without
leave to amend is improper unless it is clear . . . that the
complaint could not be saved by any amendment.”
Sonoma Cty.
Ass’n of Retired Emps. v. Sonoma Cty., 708 F.3d 1109, 1118 (9th
Cir. 2013) (brackets, citation, and internal quotation marks
omitted).
It is possible for Plaintiffs to cure the defect in
their FDCPA claims by pleading factual allegations supporting a
reasonable inference that the purpose of the nonjudicial
foreclosures was to collect the AOAO Defendants’ respective
debts.
While the Law Firm Defendants argue that amendment of
Plaintiffs’ FDCPA claims would be futile based on an argument
that Plaintiffs’ FDCPA claims are time-barred, this Court rejects
33
that argument for the same reasons set forth in the Galima Order,
2017 WL 1240181, at *13-14, and in the discussion of the
timeliness of Plaintiffs’ UDAP claims against the AOAO
Defendants, see supra Section IV.B.3.
FDCPA claims would not be futile.26
Amendment of Plaintiffs’
The dismissal of Count IV is
therefore without prejudice.
VI.
Certification
Defendants have argued that, instead of ruling upon the
issues currently before it, this Court should certify one or more
questions to the Hawai`i Supreme Court pursuant to Haw. R. App.
P. 13.
First, this request is more appropriately addressed in a
motion to certify than in memoranda regarding Fed. R. Civ. P. 12
motions.
Second:
“This court may certify a question to the
Hawai`i Supreme Court when it concerns ‘law of
Hawai`i that is determinative of the cause and
. . . there is no clear controlling precedent in
the Hawai`i judicial decisions . . . .[’]” Saiki
v. LaSalle Bank Nat’l Ass’n as Tr. for Structured
Asset Inv. Loan Trust Series 2003–BC2, Civil No.
10–00085 JMS/LEK, 2011 WL 601139, at *6 (D.
Hawai`i Feb. 10, 2011) (quoting Haw. R. App. P.
13(a)). The court, however, should not certify
questions when the answer is reasonably clear and
the court can, using its best judgment, predict
how the Hawai`i Supreme Court would decide the
issue. See id. (citing Helfand v. Gerson, 105
F.3d 530, 537 (9th Cir. 1997); Pai`Ohana v.
United States, 875 F. Supp. 680, 700 (D. Haw.
26
To the extent the Law Firm Defendants have raised any
other arguments in support of their position that amendment of
Plaintiffs’ FDCPA claims would be futile, those arguments are
also rejected.
34
1995)). . . .
DeRosa v. Ass’n of Apartment Owners of the Golf Villas, CIVIL 1500165 LEK-KSC, 2016 WL 3951061, at *2 (D. Hawai`i July 20, 2016)
(alterations in DeRosa) (some citations omitted).
While it is
true that there is no controlling Hawai`i case law, this Court
concluded in the Galima Order that it could reasonably predict
how the Hawai`i Supreme Court would decide the issues relevant to
condominium associations’ use of the former Chapter 667, Part I.
Third, it does not seem appropriate to certify
questions to the Hawai`i Supreme Court because the same issues
may already be pending before the supreme court.
See Terrazza
AOAO Galima Mem. at 9 (noting that the plaintiffs in Malabe v.
Association of Apartment Owners of Executive Centre, Civil No.
16-1-2256-12 RAN, filed an appeal and the opening brief in that
appeal was due on May 31, 2017).27
Defendants’ arguments
regarding certification may be raised more appropriately in a
motion to stay this case pending the outcome of the Malabe
appeal.
27
The Terrazza AOAO appears to suggest that Galima was
wrongly decided because this Court declined to consider the state
circuit court’s ruling in favor of the condominium association
because this Court improperly found that the Malabes had not
filed an appeal. [Terrazza AOAO Galima Mem. at 9 (quoting Galima
Order, 2017 WL 1240181, at *6).] However, even if information
about the Malabe’s appeal had been available to this Court, it
would still have declined to consider the circuit court’s Malabe
ruling because the circuit court’s legal analysis was not clear
from the materials from Malabe that were before this Court in
Galima. See Galima Order, 2017 WL 1240181, at *6.
35
CONCLUSION
On the basis of the foregoing, Defendant Association of
Apartment Owners of Terrazza/Cortbella/Las Brisas/Tiburon’s
“Motion to Dismiss Class Action Complaint, Filed August 10, 2015
[Dkt 1],” filed September 29, 2016, and Defendant Association of
Apartment Owners of Ko Olina Kai Golf Estates and Villas’ “Motion
for Judgment on the Pleadings on Counts I-IV of Plaintiffs’ Class
Action Complaint, Filed August 10, 2016,” filed October 3, 2016,
are HEREBY DENIED; and Defendant Ekimoto & Morris, LLLC’s “Motion
to Dismiss Class Action Complaint,” filed September 28, 2016, and
Defendant Porter McGuire Kiakona & Chow, LLP’s substantive
joinder therein, filed October 14, 2016, are HEREBY GRANTED IN
PART AND DENIED IN PART.
The E&M Motion and the PMKC Joinder are GRANTED insofar
as: Plaintiffs’ claims against E&M and PMKC in Counts II and III
are DISMISSED WITH PREJUDICE; and Plaintiffs’ claims against E&M
and PMKC in Count IV are DISMISSED.
The E&M Motion and the PMKC
Joinder are DENIED as to Count I and DENIED insofar as the
dismissal of Count IV is WITHOUT PREJUDICE.
This Court GRANTS
Plaintiffs leave to file an amended complaint that includes:
Count I, as pled in the original Complaint; the claims that
Plaintiffs alleged against the AOAO Defendants in Counts II and
III of the original Complaint; an amended FDCPA count against the
36
Law Firm Defendants which addresses the defect identified in this
Order; and the class action allegations, which this Court did not
address in this Order.28
Plaintiffs shall file their amended
complaint by October 11, 2017.
Because this Court has given Plaintiffs leave to file
an amended complaint, the Terrazza AOAO and the Law Firm
Defendants do not need to file answers to the original Complaint.
Because this Court has not granted Plaintiffs leave to amend
their claims against the AOAO Defendants, the Terrazza AOAO and
the Ko Olina AOAO must file their respective answers to the
amended complaint by October 25, 2017, and they must obtain leave
from this Court before filing any Rule 12 motions in lieu of
their respective answers to the amended complaint.
The Law Firm
Defendants must file their respective answers to the amended
complaint by November 1, 2017.
IT IS SO ORDERED.
28
Plaintiffs’ leave to amend is limited to their FDCPA
claims against the Law Firm Defendants. If Plaintiffs wish to
make any other changes to their original Complaint, they must
file a motion to amend pursuant to Fed. R. Civ. P. 15(a).
37
DATED AT HONOLULU, HAWAII, August 30, 2017.
/s/ Leslie E. Kobayashi
Leslie E. Kobayashi
United States District Judge
BENITA J. BROWN, ET AL. VS. PORTER MCGUIRE KIAKONA & CHOW, ET AL;
CIVIL 16-00448 LEK-KSC; ORDER DENYING DEFENDANT ASSOCIATION OF
APARTMENT OWNERS OF TERRAZZA/CORTBELLA/LAS BRISA/TIBURON’S MOTION
TO DISMISS; DENYING DEFENDANT ASSOCIATION OF APARTMENT OWNERS OF
KO OLINA KAI GOLF ESTATES AND VILLAS’ MOTION FOR JUDGMENT ON THE
PLEADINGS; GRANTING IN PART AND DENYING IN PART DEFENDANT EKIMOTO
& MORRIS, LLC’S MOTION TO DISMISS; AND GRANTING IN PART AND
DENYING IN PART DEFENDANT PORTER MCGUIRE KIAKONA & CHOW, LLP’S
SUBSTANTIVE JOINDER IN THE E&M MOTION
38
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