Am. Sav. Bank v. Chan
| Decision Date | 21 January 2020 |
| Docket Number | SCWC-15-0000395,SCWC-15-0000309 |
| Citation | 456 P.3d 167 |
| Parties | AMERICAN SAVINGS BANK, F.S.B., a federal savings bank, Respondent/Plaintiff-Appellee, v. Johnny Kinman CHAN; Jean Toshiko Chan; Director of Taxation, State of Hawai‘i; Capital One Bank (USA) N.A.; Hawai‘i Housing Finance and Development Corporation, a Public Body and Corporate Politic, Respondents/Defendants-Appellees, and Villages of Kapolei Association (incorrectly identified in the caption as Association of Apartment Owners of the Villages of Kapolei), Petitioner/Defendant-Appellant. (CAAP-15-0000309; CIVIL NO. 13-1-0944) Villages of Kapolei Association, a Hawai‘i non-profit corporation, Petitioner/Plaintiff-Appellant, v. Johnny Kinman Chan, Jean Toshiko Chan; First Bank National Association; Department of Taxation, State of Hawai‘i; Capital One Bank (USA) N.A.; Hawai‘i Housing Finance and Development Corporation, a Public Body and Body Corporate and Politic, Respondents/Defendants-Cross-Claim Defendants-Appellees, and American Savings Bank, F.S.B., a federal savings bank, Respondent/Defendant-Cross-Claimant-Appellee. (CAAP-15-0000395; CIVIL NO. 12-1-2466) |
| Court | Hawaii Supreme Court |
M. Anne Anderson, Honolulu, and Paul A. Ireland Koftinow, For Petitioner/Defendant-Appellant
Craig Y. Iha, Sandra A. Ching, and Matthew S. Dvonch, Honolulu, for Respondent/Defendant-Appellee
This certiorari proceeding arises from two cases filed and consolidated in the Circuit Court of the First Circuit ("circuit court") concerning a foreclosure dispute between the Villages of Kapolei Association ("Association"), the Hawai‘i Housing Finance and Development Corporation ("HHFDC"), Johnny Kinman Chan and Jean Toshiko Chan ("Chans"), and American Savings Bank, F.S.B. ("ASB"). The dispute concerns the circuit court’s determination of lien priority between the Association’s and HHFDC’s competing liens and the valuation of HHFDC’s senior lien. The underlying foreclosure of ASB’s first mortgage lien is not in dispute.
The Association’s application for writ of certiorari ("Application") raises three issues. First, the Association contends the Intermediate Court of Appeals ("ICA") erred by affirming the circuit court’s alleged retroactive application of Hawai‘i Revised Statutes ("HRS") § 201H-47 (Supp. 2009) to rule that HHFDC’s lien was senior and superior to the Association’s liens. We hold that the ICA did not err because (1) whether the circuit court actually applied HRS § 201H-47 was unclear; (2) HHFDC had lien priority over the Association’s liens pursuant to HRS § 201E-221 (repealed 1997), the statute in effect when the deed and Shared Appreciation or Equity ("SAE") Agreement between the Chans and HHFDC’s predecessor-in-interest, the Housing Finance and Development Corporation ("HFDC") were entered; and (3) HHFDC had lien priority over the Association pursuant to the "first in time, first in right" principle and the SAE Agreement, which was incorporated into the deed.
Second, the Association asserts the ICA erred by ignoring the plain language of Sections 1, 2, 3, and 7 of the SAE Agreement relating to the applicability of the agreement’s appraisal process and whether the SAE Agreement became null and void upon ASB’s foreclosure. We hold the ICA did not err in determining the appraisal process applied and that ASB’s foreclosure did not nullify the SAE Agreement.
Third, the Association argues the ICA erred by holding that HHFDC had rights under the SAE Agreement because there were genuine issues of material fact regarding HHFDC’s standing to enforce the agreement. We hold that, as a matter of law, HHFDC had standing to enforce the SAE Agreement as successor to HFDC pursuant to Act 350 of 1997 and Act 196 of 2005. 1997 Haw. Sess. Laws Act 350; 2005 Haw. Sess. Laws Act 196.
We therefore affirm the ICA’s August 20, 2019 judgment on appeal.
Act 337 of 1987 established HFDC to promote affordable housing. 1987 Haw. Sess. Laws Act 337, § 15 (§-5) at 1049 (codified at HRS ch. 201E (repealed 1997)). Act 350 of 1997 combined HFDC with the Hawai‘i Housing Authority and Rental Housing Trust Fund to create the Housing and Community Development Corporation of Hawai‘i ("HCDCH"). 1997 Haw. Sess. Laws Act 350, § 2 (§-2) at 1013 (codified at HRS ch. 201G (repealed 2006)). Act 350 stated that HCDCH would "succeed to all of the rights and powers previously exercised" by HFDC, and that "[a]ll deeds, leases, contracts ... or other documents executed or entered into by or on behalf of [HFDC] ... shall remain in full force and effect." Act 350, § 20 at 1091.
Act 196 of 2005 split HCDCH into the Hawai‘i Public Housing Administration and HHFDC. 2005 Haw. Sess. Laws Act 196, § 19 at 620 (codified at HRS ch. 201H (Supp. 2005)). Act 196 transferred "[a]ll rights, powers, functions, and duties of [HCDCH]" relating to state housing and financing programs to HHFDC. § 22 at 631. Act 196 also stated that "[a]ll deeds, leases, contracts ... or other documents executed or entered into by or on behalf of [HCDCH] or [HFDC] ... which are made applicable to [HHFDC] by this Act, shall remain in full force and effect." § 25 at 632.
On June 6, 1991, the Chans purchased a house ("Property") in the Villages of Kapolei, a planned affordable housing community created by HFDC. The Chans purchased the Property through HFDC’s SAE Program, which allowed participants to purchase a home at a discounted price in exchange for an agreement ("SAE Agreement") granting HFDC a share of the appreciation of the home’s equity ("Net Appreciation") if the property were ever sold or transferred.1
Section 2 of the SAE Agreement outlined when HFDC would be entitled to its share of the Net Appreciation value and how HFDC’s share would be calculated:
The SAE Agreement was incorporated into the Chans’ deed, which was recorded in Land Court on June 12, 1991.
The Chans financed their purchase of the Property through a $111,896 loan secured by a June 6, 1991 mortgage to ASB. Section 7 of the SAE Agreement, titled "First Mortgage Protection," granted ASB’s mortgage priority over HFDC’s liens in the event of foreclosure. Section 7 also provided that "any person who acquires legal title to the Property as a result of foreclosure" would acquire title free of HFDC’s liens, and that the SAE Agreement would be "null and void upon a conveyance of the Property through a foreclosure sale ...."
Upon signing the deed, the Chans also agreed to the Association’s Declaration of Covenants, Conditions, and Restrictions ("Covenants"). On November 14, 2006, the Association recorded a $26,687.30 judgment lien against the Property in Land Court for the Chans’ failure to adhere to landscaping requirements in violation of the Covenants. On September 5, 2012, the Association filed a $5,763.66 lien against the Property in Land Court because the Chans failed to pay for maintenance assessments in violation of the Covenants.
On December 3, 2012, ASB sent the Chans a notice of default demanding payment on the mortgage.
On October 1, 2012, the Association filed a complaint for foreclosure. On March 28, 2013, ASB filed a complaint for foreclosure alleging the Chans had defaulted on the loan and mortgage, and that the mortgage was the "valid first lien upon the property ...." ASB’s complaint named the Association as a defendant, and HHFDC was later identified and made a party defendant.3
On September 20, 2013, ASB filed a motion for summary judgment. The parties stipulated to consolidate the ASB and the Association foreclosure actions. The circuit court granted ASB’s motion and entered a Hawai‘i Rules of Civil Procedure ("HRCP") Rule 54(b) judgment on May 12, 2014.4
On April 22, 2014, HHFDC filed a motion for summary judgment ("HHFDC’s motion for summary judgment"), arguing that its lien was senior and superior to all other liens except ASB’s under the "first in time, first in right" principle. HHFDC asserted it had assumed HFDC’s rights under the deed by statute. HHFDC contended that HRS § 201H-47(e)5 entitled HHFDC to its Net Appreciation share when a foreclosure action is filed, and that the SAE lien was a covenant running with the land under HRS § 201H-47(a)(6). HHFDC asserted its Net Appreciation share was $244,032, and it attached a copy of a November 2013 appraisal prepared by Appraiser Kathy Ann Oshiro ("Appraiser Oshiro") valuing the Property at $505,000.
The Association opposed HHFDC’s motion for summary judgment, arguing that "HHFDC had based almost its entire argument on HRS § 201H-47," which was not retroactive, and that any retroactive application of HRS § 201H-47 would unconstitutionally impair the Association’s vested rights. The Association contended that, under Section 7, HHFDC’s SAE Agreement rights were extinguished when ASB foreclosed on its mortgage.6 The Association also argued that, even if HHFDC had an interest in the SAE Agreement, the agreement limited HHFDC’s interest to the proceeds the Chans would "realize" from the transfer or sale of the Property7 — "[i]n other words, HHFDC would recover from the proceeds remaining after payment of all liens and encumbrances." The Association maintained that HHFDC did not comply with Section 3 of the SAE Agreement because Appraiser Oshiro was not sufficiently qualified to appraise the Property and HHFDC had not...
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