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Galima v. Association of Apartment Owners of Palm Court

United States District Court, D. Hawaii

December 31, 2018

ASSOCIATION OF APARTMENT OWNERS OF PALM COURT, by and through its Board of Directors; BRYSON CHOW, Defendants.



         Before the Court are: Plaintiffs Rudy Akoni Galima and Roxana Beatriz Galima's (“Plaintiffs”) Motion for Partial Summary Judgment on Counts I and II (Wrongful Foreclosure and Violation of the Fair Debt Collection Practices Act) (“Plaintiffs' Motion”), filed on January 19, 2018; Defendant Association of Apartment Owners of Palm Court's (“AOAO”)[1] Motion for Summary Judgment (“AOAO Motion”), filed on January 24, 2018; and Defendant Bryson Chow's (“Chow”) Motion for Summary Judgment Regarding the Fair Debt Collection Practices Claim in Count II of the Third Amended Complaint [Dkt. 88] (“Chow Motion”), also filed on January 24, 2018. [Dkt. nos. 115, 117, 118.]

         The Motions are hereby granted in part and denied in part, for the reasons set forth below. In summary, this case will proceed to trial on: 1) the AOAO's defenses as to Count I; 2) if Plaintiffs prevail on the AOAO's asserted defenses to Count I, Plaintiffs' damages arising from the wrongful foreclosure; and 3) all of the parties' asserted issues related to Counts II and V, except for Plaintiffs' argument that the statute of limitations for each of those claims was tolled based on fraudulent concealment.


         This matter arises out of the purchase and foreclosure of a condominium unit. Plaintiffs originally filed this action in the State of Hawai'i Circuit Court of the First Circuit (“state court”). The AOAO then timely removed to federal district court based on federal question jurisdiction. [Notice of Removal, filed 1/22/16 (dkt. no. 1), at ¶ 3.] The operative pleading at this time is the Third Amended Complaint, which was filed on May 22, 2017. [Dkt. no. 88.] It pleads the following claims: wrongful foreclosure against the AOAO (“Count I”); violation of the Fair Debt Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692(f), et seq., against Chow (“Count II”); a Haw. Rev. Stat. Chapter 480 claim against the AOAO for unfair or deceptive acts or practices (“UDAP” and “Count III”); a fraud claim against the AOAO (“Count IV”); and a claim against the AOAO for mental anguish and emotional distress, which has been construed as a claim for intentional infliction of emotional distress (“IIED” and “Count V”).[2]

         All parties seek summary judgment as to some or all of Plaintiffs' claims.

         I. Purchase and Foreclosure

         In 2006, Plaintiffs purchased Apartment No. 10A in a condominium project known as Palm Court, Increment 1C (“Unit” and “Palm Court”). Plaintiffs financed the purchase of the Unit with a first mortgage securing a $249, 600 loan, and a second mortgage securing a $62, 400 loan. [Separate & Concise Statement of Material Facts in Supp. of Pltfs.' Motion (“Pltfs.' CSOF”), filed 1/19/18 (dkt. no. 116), at ¶¶ 1, 3; Chow's Concise Statement of Facts in Supp. of Chow Opp. (“Chow Responsive CSOF”), filed 5/14/18 (dkt. no. 143), at ¶ 17 (admitting Pltfs.' ¶¶ 1, 3); AOAO's Response to Pltfs.' CSOF (“AOAO Responsive CSOF”), filed 5/14/18 (dkt. no. 146), at ¶¶ 1, 3 (same).]

         The AOAO is the Palm Court's condominium association. [Pltfs.' CSOF at ¶ 2; Chow Responsive CSOF at ¶ 17; AOAO Responsive CSOF at ¶ 2.]

         Plaintiffs rented the Unit, but their tenants failed to pay the rent in a timely manner. This caused Plaintiffs to fall behind on their payments of condominium association fees. [Pltfs.' CSOF at ¶ 4; Chow Responsive CSOF at ¶ 17 (admitting Pltfs.' ¶ 4); AOAO Responsive CSOF at ¶ 4 (denying Pltfs.' ¶ 4 only to the extent the AOAO points out the payment of the fees was solely Plaintiffs' responsibility).] The AOAO's attorneys sent Mr. Galima letters demanding payment for the unpaid association fees. One example of such letters is the letter received by Mr. Galima on April 15, 2010. [Pltfs.' CSOF, Decl. of Rudy Akoni Galima (“Galima Decl.”) at ¶¶ 11-12, Exh. G (letter dated 4/8/10 to Plaintiffs from Chow and Christian P. Porter, Esq., of Porter Tom Quitiquit Chee & Watts, LLP (“4/8/10 Demand Letter” and “PTQCW”)).] The 4/8/10 Demand Letter stated the total amount due, as of the date of the letter, was: $6, 433.91 in association fees; $473.18 in late fees; and $625.97 in attorneys' fees and costs. [Galima Decl., Exh. G at 1.]

         Mr. Galima, as a result, asked for a reasonable payment plan through which he would pay off the unpaid association fees in his letter sent on April 18, 2010 (“4/18/10 Letter”). [Galima Decl. at ¶¶ 13-14, Exh. H.] It stated:

I'm a member of the United States Marine Corps stationed onboard the USS Cleveland. My wife has received a letter in the mail regarding a payment for maintenance fee [sic] for my property at Palm Court (91-869 Puamaeole St. Apt 10A Ewa Beach). I am currently deployed on ship so my communication with you will be limited to when the phones and email are working. We were stationed in Hawaii until I received orders in 2008 to report to Camp Pendleton, CA. I have hired a property manager to take care of my property and to find tenants. The first tenant I had fell behind on payments and the current tenant was also falling behind payments. Between my family's expenses in California and my property expenses in Hawaii I was falling behind on payments due to the tenants I had not making their payments to me. I had to decide which payment to make first between my actual mortgage and the maintenance fee for Palm Court. In the hardship situation that I am in, I am respectfully requesting to have a chance to make a payment plan with your company before you push this any further. Please advise me on what actions I need to take or any other information you need from me. As of right now I can afford to make a payment of $150.00 a month in addition to the regular maintenance fee payments. I will also make a payment of $1500 towards the outstanding balance. . . .

[Galima Decl., Exh. H at 1 (emphases added by Pltfs.).] The 4/18/10 Letter is also dated December 29, 2009 and addressed to the attention of Joseph Megill at Motooka Yamamoto & Revere (“MYR”). It states it was “(Resubmitted to:)” the attention of “Mrs. Kimura” at PTQCW. [Id.]

         On April 1, 2010, the AOAO recorded, in the Land Court, a Notice of Lien and Notice of Special Assessment Lien (“Lien Notice”) on the Unit for Plaintiffs' unpaid association fees, in the amount of $6, 882.86. [Galima Decl., Exh. F (Lien Notice); Pltfs.' CSOF at ¶ 5; Chow Responsive CSOF at ¶ 18 (admitting cited portions of Pltfs.' ¶ 5); AOAO Responsive CSOF at ¶ 5 (admitting Pltfs.' ¶ 5).]

         A. Correspondence Regarding Unpaid Maintenance Fees

         Plaintiffs sent emails offering to make payments to the AOAO. Among these emails is a May 18, 2010 email from Mr. Galima to Happi Kimura, with PTQCW, asking for the status of his request - presumably the 4/18/10 Letter; a June 10, 2010 email from Mr. Galima to Ms. Kimura, noting that the May maintenance fee payment had been made the previous month; and a June 22, 2010 email in which Mr. Galima asked Happi Kimura to “let [him] know how [he] can start making payments towards [his] balance.” [Pltfs.' Separate & Concise Statement of Material Facts in Supp. of Pltfs.' AOAO Opp. (“Pltfs.' Responsive AOAO CSOF”), filed 5/14/18 (dkt. no. 148), Decl. of Rudy Akoni Galima (“Galima AOAO Decl.”), Exh. C at ¶ 000090, P000087-88, and P000089.]

         B. The Foreclosure

         Chow is an attorney. His client was the AOAO. In September 2010, Chow filed a nonjudicial foreclosure of the lien on Plaintiffs' Unit, pursuant to Chapter 667, Part I, on behalf of the AOAO. [Pltfs.' CSOF at ¶ 7; Chow Responsive CSOF at ¶ 17 (admitting Pltfs.' ¶ 7); AOAO Responsive CSOF at ¶ 7 (admitting cited portions of Pltfs.' ¶ 7, but stating Chow was an independent contractor); Pltfs.' CSOF at ¶ 10; Chow Responsive CSOF at ¶ 17 (admitting Pltfs.' ¶ 10); AOAO Responsive CSOF at ¶ 10 (admitting cited portions of Pltfs.' ¶ 10, but stating Chow initiated the nonjudicial foreclosure proceedings pursuant to Chapter 667, Part I, as well as the Palm Court's Declaration of Condominium Property Regime (“Palm Court Declaration”) and the Palm Court By-Laws).[3]

         On September 1, 2010, the AOAO recorded in the Bureau of Conveyances (“BOC”) a Notice of Association's Non-Judicial Foreclosure Under Power of Sale (“Foreclosure Notice”). [Galima Decl., Exh. I.] The Foreclosure Notice stated that the AOAO would sell the Unit by public auction on October 19, 2010 and, on that date and at the auction, the AOAO sold the Unit to itself. [Pltfs.' CSOF at ¶¶ 11-12; Chow Responsive CSOF at ¶ 17 (admitting Pltfs.' ¶¶ 11-12); AOAO Responsive CSOF at ¶ 11 (admitting Chow sold the Unit at a public auction on that date, but stating he was acting in his capacity as an independent contractor), ¶ 12 (admitting Pltfs.' ¶ 12 regarding the purchase of the Unit).] Chow conducted the public auction as stated in the Foreclosure Notice. There were no other bidders present at the auction, and the sale price was one dollar. [Galima Decl., Exh. C (AOAO's Aff. of Non-Judicial Foreclosure Sale Under Power of Sale, recorded in the Land Court on 11/4/10 (“Foreclosure Aff.”)) at 2-3.]

         As the AOAO's attorney, Chow completed and signed the Foreclosure Affidavit. [Id. at 1-4 & Exh. A; Pltfs.' CSOF at ¶ 17; Chow Responsive CSOF at ¶ 17 (admitting Pltfs.' ¶ 17); AOAO Responsive CSOF at ¶ 17 (admitting Pltfs.' ¶ 17, but stating Chow was acting in his capacity as an independent contractor).] The Foreclosure Notice states: “THIS COMMUNICATION IS FROM A DEBT COLLECTOR. NOTICE IS HEREBY GIVEN THAT THIS ACTION IS AN ATTEMPT TO COLLECT A DEBT, AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE, AND THE DEBT MAY BE DISPUTED.” [Galima Decl., Exh. I at 01001032 (emphasis in original).]

         On December 2, 2009, Mr. Galima - who was deployed on a ship at the time - sent an email to “Michael” at, requesting a payment plan for the outstanding maintenance fees. The email described the same circumstances Mr. Galima wrote about in the 4/18/10 Letter. On December 3, 2009, Mr. Galima forwarded the email to [Major Responsive Decl., Exh. 5 at 2.] On December 4, 2009, Joseph Megill - assistant to Milton Motooka, Esq., of MYR - wrote an email back, stating Mr. Galima was “entitled to request a payment plan with the Board through our office.” [Id. at 1.] Mr. Megill instructed Mr. Galima to the put the request, with further information, in writing and he would forward it to the Board for review. [Id.] On December 29, 2009, Mr. Galima responded to Mr. Megill, instructing Mr. Megill to use his personal email address and his military email address. Mr. Galima stated, “I will be ashore soon in another country so I will not have much communication access. I will try and check my personal email as much as I can to see if I received any messages from you.” [Id.] In addition, Mr. Galima sent a letter dated December 29, 2009 to MYR, attention: Joseph Megill (“12/29/09 Letter”), containing the same description of Plaintiffs' circumstances as the 4/18/10 Letter. [Major Responsive Decl., Exh. 6.] The 12/29/09 Letter stated: “As of right now I can afford to make a payment of $150.00 a month. I will also use some of my tax return to repay the balance.” [Id.]

         According to AOAO, the payment plan proposed in the 12/29/09 Letter “would not even cover the cost of the monthly dues, much less the nearly $6, 000 in overdue amounts.” [AOAO Responsive CSOF at Opp. ¶ 8 (citing AOAO Responsive CSOF, Decl. of Rich Hargrave (“Hargrave Responsive Decl.”), [4] Exh. 7).] After submitting the payment plan in the 12/29/09 Letter, according to the AOAO, Plaintiffs did not attempt to make payments on the overdue maintenance fees. [Id. at ¶ 9 (citing Hargrave Responsive Decl., Exh. 7 (“Palm Court Statement of Receipts and Disbursements for Period Ended 09/30/2017”)).]

         Mr. Galima did not receive a response to his 12/29/09 Letter. [Major Responsive Decl., Exh. 9 at 1 (email from Mr. Galima to Plaintiffs' counsel, forwarding emails about the request for a payment plan and stating there was no response to the “payment plan request in December 2009”).]

         While the AOAO acknowledges that the 4/18/10 Letter proposed a payment plan to PTQCW, it asserts the proposal was the same - $150 per month, and it would have taken Plaintiffs over forty seven months to pay the overdue amounts. [AOAO Responsive CSOF at Opp. ¶¶ 12-13.] However, the 4/18/10 Letter proposed a payment of $1, 5000, in addition to $150 per month, on top of the regular monthly maintenance fee payments.

         On May 21, 2010, PTQCW sent a letter rejecting the payment plan proposed in the 4/18/10 Letter and informing them the amount due as of that date was $7, 679.52 (“5/21/10 Rejection Letter”). [Hargrave Responsive Decl., Exh. 10 at 01001008.] The 5/21/10 Rejection Letter also stated:

The Board would be willing to consider a proposal by you so long as such proposal includes an acceptable variation of the following items: 1) you will agree to a payment plan which will bring your account current within (6) months; and 2) you will pay all future monthly assessments on their respective due dates without fail.


         The AOAO submitted a letter dated July 12, 2010 to Plaintiffs from PTQCW stating the amount due as of that date was $8, 751.37 (“7/12/10 Demand Letter”). [Hargrave Responsive Decl., Exh. 11 at 01001011.] It stated:

If you are unable to pay the aforementioned amount in full, the Association will consider an acceptable payment plan. Please be advised that if (a) payment in full of $8, 751.37 (or $8, 801.80 if payment is received after July 15, 2010) or (b) a payment plan proposed by you is not received by this office and accepted by the Association, within ten (10) days of the date of this letter, the Association may instruct us to initiate a non-judicial foreclosure action or file suit against you and institute a judicial foreclosure proceeding against your unit. . . .

[Id.] Chow and Mr. Porter sent the 7/12/10 Demand Letter: to Plaintiffs by certified mail, receipt requested, and by regular mail to their post office box in Keaau; by the same means to Plaintiffs at their Oceanside, California address; and to Mr. Galima via email. [Id.] The return receipts for both addresses are signed, and the signature appears to be “R Galima.” [Id. at 01001013-14.]

         A letter dated August 30, 2010 to Plaintiffs - care of Betsy Maler, RA - from Chow and Mr. Porter, was sent which stated the amount due as of that date was $10, 697.40 (“8/30/10 Demand Letter”). [Hargrave Responsive Decl., Exh. 12.] A letter dated August 31, 2010, stating it was sent by certified mail, return receipt requested, as well as by regular mail and hand delivery, was sent to Plaintiffs at: the Unit; their Keaau address; and their Oceanside, California address (“8/31/10 Notice Letter”). [Hargrave Responsive Decl., Exh. 13.] There is no mailing documentation, and Plaintiffs deny receiving it. [Pltfs.' AOAO Reply CSOF at ¶ 17.] The 8/31/10 Notice Letter provides that the AOAO was exercising its rights under § 514B-146 (2010) and Chapter 667, Part I to sell the Unit at a public auction without a court-appointed commissioner and states a copy of the Foreclosure Notice is attached.

         An Affidavit of Publication, dated September 28, 2010, stating that notice of the public sale of the Unit was published in the Honolulu Star-Advertiser on September 14, 21, and 28, 2010. [AOAO Responsive CSOF, Exh. 15.[5] PTQCW recorded the Foreclosure Affidavit and the Quitclaim Deed.[6] [Id. at ¶¶ 23-24; Pltfs.' AOAO Reply CSOF at ¶¶ 23-24.] At the time of the 12/29/09 Letter, the regular monthly association fees were $332.33. [AOAO CSOF at ¶ 10; Pltfs.' Responsive AOAO CSOF at ¶ 10 (stating AOAO's ¶ 10 is undisputed).] The Owner History Report for Plaintiffs' Unit shows that, from July 2009 through the foreclosure of the Unit, Plaintiffs did not pay their regular monthly association fees, and they did not pay any of the delinquent fees. They appear to have made one payment in May 2010 of $311.83 in legal fees and $50.41 in late fees. [AOAO CSOF, Decl. of David Donaldson (“Donaldson Decl.”) at ¶ 5, [7]Exh. H at 01001109-10.]

         After losing the Unit in the foreclosure, Plaintiffs remained liable for the amount due on the first mortgage, as well as the AOAO association fees. [Galima Decl. at ¶¶ 18-19.] However, Mr. Galima labored under the belief that the foreclosure was proper because of the statements and representations in the demand letters. [Id. at ¶ 21.] He “was not aware that [he] had valid legal claims against the AOA and the AOAO's attorney until December 2015.” [Id. at ¶ 22.]

         C. Condominium Unit

         Plaintiffs' Unit was part of the AOAO and Plaintiffs were members of the AOAO while they owned the Unit. [Galima Decl., Exh. B (Apartment Deed recorded on 4/4/06 in the Land Court); AOAO Responsive CSOF at Opp. ¶¶ 2-4;[8] Pltfs.' Response to AOAO's Responsive CSOF (“Pltfs.' AOAO Reply CSOF”), filed 5/21/18 (dkt. no. 154), at ¶¶ 2-4 (admitting AOAO's Opp. ¶¶ 2-4).] The Palm Court By-Laws “provide that the terms used therein shall have the meanings given to them in Chapter 514A, HRS, as amended . . .; that the AOAO may assess fees; and that the AOAO may record a lien against a property if such fees are not paid.” [AOAO Responsive CSOF at Opp. ¶ 5; Pltfs.' AOAO Reply CSOF at ¶ 5.] The By-Laws provide, among other things, that the AOAO may enforce provisions of the By-Laws, procure legal services, and enforce penalties and fines for violations of the By-Laws, and that such penalties and fines shall constitute a lien against an apartment owner which shall be subordinate to unpaid mortgages. [Major Responsive Decl., Exh. 3 (Palm Court By-Laws) at 9-10, 12.] The Palm Court By-Laws also state that: “Each Apartment Owner shall be liable for and pay a share of the common expenses in preparation to the common interest appurtenant to his apartment.” [Id. at 23-24.] Further, that each monthly assessment is the separate debt and obligation of each apartment owner and that failure to pay this obligation may result in a lien being recorded against the apartment owner and in favor of the AOAO. [Id. at 25-27.]

         The Palm Court Declaration and By-Laws were amended in response to the enactment of Haw. Rev. Stat. Chapter 514B. [Major Responsive Decl., Exh. 4 (Amendment to the Decl. of Condo. Property Regime of Palm Court & Amendment to the By-Laws of the Association of Apartment Owners of Palm Court, filed 6/8/15 with the BOC (“2015 Amendment”)).] This amendment occurred after the AOAO obtained Plaintiffs' Unit in the Chapter 667, Part I foreclosure.[9] The 2015 Amendment added a new section 19 to Article IX of the Palm Court By-Laws, [10] stating:

Chapter 514B, Hawaii Revised Statutes (“Chapter 514B”), is adopted and shall be applicable to and govern the Project, including the Association. It is the intent of this Section that the adoption of Chapter 514B authorizes and empowers the Association to achieve any result permitted by Chapter 514B. To the extent that there is any conflict between the provisions of these By-Laws and Chapter 514B, . . . Chapter 514B shall control unless Chapter 514B expressly provides otherwise. Without limiting the generality of the following:
(a) These By-Laws shall be liberally construed to facilitate the operation of the Project under Chapter 514B.
. . . .
(f) Punitive damages may not be awarded except as specifically provided in Chapter 514B or by other rule of law.

[Id. at 5-6.]


         I. Continuance Requests

         The AOAO Motion includes a request for a Fed.R.Civ.P. 56(d) continuance.[11] [AOAO Opp. at 25-27.] The AOAO asserts a continuance is warranted based on a lack of “exhaustive discovery” because the AOAO anticipated that the motion to stay would be granted.[12] [Major Responsive Decl. at ¶ 12.]

         This district court has stated:

Rule 56(d) permits a district court to continue a summary judgment motion “upon a good faith showing by affidavit that the continuance is needed to preclude summary judgment.” California v. Campbell, 138 F.3d 772, 779 (9th Cir. 1998). A party requesting a continuance bears the burden of (1) filing a timely application that specifically identifies relevant information; (2) demonstrating that there is some basis to believe that the information sought exists; and (3) establishing that such information is essential to resist the summary judgment motion. See Emp'rs Teamsters Local Nos. 175 & 505 Pension Trust Fund v. Clorox Co., 353 F.3d 1125, 1130 (9th Cir. 2004) (citation omitted); accord Moss v. U.S. Secret Serv., 572 F.3d 962, 966 n.3 (9th Cir. 2009) (“Rule 56([d]) requires a party seeking postponement of a summary judgment motion to show how additional discovery would preclude summary judgment and why it cannot immediately provide specific facts demonstrating a genuine issue of material fact.” (punctuation, quotations, and citations omitted)).

Noetzel v. Haw. Med. Serv. Ass'n, CIVIL NO. 15-00310 SOM-KJM, 2017 WL 690531, at *1 (D. Hawai'i Feb. 21, 2017) (alteration in Noetzel). The AOAO's Rule 56(d) request is DENIED because neither the Major Responsive Declaration nor any other material that the AOAO submitted in connection with Plaintiffs' Motion establishes that there is some information essential to the AOAO's response to Plaintiffs' Motion that the AOAO could not have obtained prior to filing the AOAO Opposition.

         In addition, Chow suggests that Plaintiffs' presentation of certain evidence could be construed as a request for a Rule 56(d) continuance. [Chow Reply at 12-14.] This Court declines to construe Plaintiffs' opposition materials as requesting a Rule 56(d) continuance because Plaintiffs neither expressly requested a continuance nor attempted to address the Rule 56(d) requirements. Further, specifically as to Count II (the only remaining claim against Chow), the fact that Plaintiffs have themselves moved for summary judgment shows they do not believe a continuance is necessary for them to respond to the Chow Motion. This Court therefore turns to the merits of Plaintiffs' claims, beginning with their claims against the AOAO.

         II. Plaintiffs' Claims Against the AOAO

         A. Count I - Wrongful Foreclosure

         1. Elements of the Claim

         Wrongful foreclosure is a cognizable claim under Hawai'i law, and “[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.” 3/30/17 Order, 2017 WL 1240181, at *9 (brackets, citations, and internal quotation marks omitted). Further, “because § 514B-146(a) (2010)[13] 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.” Id.; see also Malabe, 2018 WL 6258564, at *2 (rejecting the condominium association's argument that Haw. Rev. Stat. ...

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