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Galima v. Association of Apartment Owners of Palm Court

United States District Court, D. Hawaii

March 30, 2017

RUDY AKONI GALIMA and ROXANA BEATRIZ GALIMA, Plaintiffs,
v.
ASSOCIATION OF APARTMENT OWNERS OF PALM COURT, by and through its Board of Directors; DOE DEFENDANTS 1-10, Defendants.

         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

          Leslie E. Kobayashi, United States District Judge

         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.] Plaintiffs Rudy Akoni Galima and Roxana Beatriz Galima (“Plaintiffs”) filed their memorandum in opposition to the AOAO Motion (“AOAO 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, 63.] 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 supplemental memoranda. [Dkt. nos. 75 (Chow Supplement), 76 (AOAO Supplement), 77 (Plaintiffs' Supplement).] After careful 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. Specifically, the Court DENIES the Chow Motion as to Count II, and GRANTS the Chow Motion in all other respects.

         INTRODUCTION

         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”). Plaintiffs' 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 duty.” [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 homeowners' association. [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.] On 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 foreclosure. [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 owed. 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. [Id. at ¶¶ 15-17.] In spite of these events, Defendants issued notice that they would sell the Unit pursuant to Haw. Rev. Stat. § 514B-146 and §§ 667-5 to 667-10 (“Chapter 667, Part I”), and Defendants conducted the sale on about October 19, 2010.[3] The AOAO submitted the winning bid and executed a quitclaim deed as both the grantor and the grantee. The deed was recorded on November 9, 2010. Because of Defendants' actions, the Short Sale did not close. 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.]

         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 omitted)]. This Court construes Count V as alleging a claim for the intentional infliction of emotional distress (“IIED”). See 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 all claims.

         DISCUSSION

         I. 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. [Second Amended Complaint at ¶ 18.] Haw. Rev. Stat. § 514B-22 states, [4] in pertinent part:

Sections 514B-4, 514B-5, 514B-35, 514B-41(c), 514B-46, 514B-72, and part VI, [5] 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:
(1) Shall apply only with respect to events and circumstances occurring on or after July 1, 2006; and
(2) 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 impairment of contract.

         According to the Second Amended Complaint, the Palm Court homeowners' association was created in or around 1990. [Second Amended Complaint at ¶ 9.] There is no dispute that the events at issue in this case occurred after July 1, 2006. Further, 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:

         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 the mortgage. 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 attorney shall:
(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 taxation; and
(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 information:
(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 once auctioned.
(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, Part I. 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 667-29 (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 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). When 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 Amended Complaint.[9] [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 No. 16-1-2256-12 RAN, the circuit court granted the defendant association's motion to dismiss the complaint. [Suppl. Exhs., 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 federal court.” 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. Further, the procedural posture in each case does not render the orders persuasive. 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. Judgment was entered in Malabe on February 17, 2017. [Suppl. Major Decl., Exh. C (Final Judgment); id., Exh. D (Notice of Entry of Final Judgment).] The 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. For these 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 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 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 non-judicial 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 default”).

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 stated:

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). Thus, 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 non-mortgage 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.” § 667-40. 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.” Under 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 a lien for the purpose of securing the payment of money.” § 667-21(b) (2010). 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.” For purposes 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 nonjudicial foreclosure.” § 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 law. 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 higher. 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]

         The Hawai`i Supreme Court's discussion in Hungate of the legislative history behind the 2008 amendments to Chapter 667 is instructive.

[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 entitled”).
. . . [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. 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 mortgage. 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 § 514B-146(a) (2010), a condominium association could choose freely between judicial foreclosure, Part I foreclosure, or Part II foreclosure. 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 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 restriction. 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 § 514B-146(a) (2010) that the foreclosure of an association lien be treated “in like manner as a mortgage of real property” would be meaningless. 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 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. 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. 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 ...


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