Sakal v. Ass'n of Apartment Owners of Hawaiian Monarch
| Decision Date | 18 June 2020 |
| Docket Number | SCWC-15-0000529 |
| Citation | 466 P.3d 399 |
| Court | Hawaii Supreme Court |
| Parties | Christian SAKAL, Petitioner/Plaintiff-Appellant, v. ASSOCIATION OF APARTMENT OWNERS OF HAWAIIAN MONARCH; Jonah Scott Kogen; and K&F 1984 LLC, Respondents/Defendants-Appellees. |
Gary Victor Dubin, Frederick J. Arensmeyer, Honolulu, for petitioner
Robert E. Chapman, Carlos D. Perez-Mesa, Jr., Mary Martin, Honolulu, for respondent Association of Apartment Owners of Hawaiian Monarch
Jeffrey P. Miller, Honolulu, for respondent Jonah Scott Kogen
John A. Morris, M. Anne Anderson, Kapono F.H. Kiakona, Honolulu, for amicus curiae Community Associations Institute
This case arises from the nonjudicial foreclosure of the petitioner's apartment by the apartment owners’ association based on unpaid assessments. After the sale was conducted, petitioner filed a complaint against the association and the purchaser of the property for wrongful foreclosure, seeking relief that included damages and title to the property. The trial court dismissed the complaint, finding that it failed to state a claim upon which relief could be granted. Particularly, the court found that Hawai‘i Revised Statutes (HRS) chapter 667, which governs foreclosures, contained a statutory bar that precluded the claims in the complaint. On appeal, the Intermediate Court of Appeals determined the statutory bar precluded petitioner's claim to title of the property against the purchaser but did not preclude petitioner's claim for damages against the association.
On certiorari, we consider whether the petitioner's claim for wrongful foreclosure, which is based on the association's lack of a valid power of sale, is statutorily limited or barred. Because we conclude that the petitioner's claim to title of the property is not limited by HRS chapter 667 and that its provisions do not bar a common law claim of wrongful foreclosure based on the lack of a power of sale, we hold that the complaint did state a claim against both the association and the purchaser of the apartment. Thus, the dismissal of the apartment owner's claims against both defendants for wrongful foreclosure and the Intermediate Court of Appeals’ partial affirmance of the dismissal were erroneous.
On March 28, 2006, Christian Sakal acquired an apartment in the Hawaiian Monarch Condominium Project (the property) as a tenant in severalty. On March 16, 2012, the Association of Apartment Owners of Hawaiian Monarch (AOAO Hawaiian Monarch or the AOAO) filed a Notice of Lien with the Office of Assistant Registrar of the Land Court against Sakal's property for unpaid assessments. The Notice stated that the lien claimed a pre-petition amount of $11,417.91 and a post-petition amount of $10,589.42.1
Three months later, the AOAO filed a Notice of Default and Intention to Foreclose on Sakal's property in the Office of the Assistant Registrar of the State of Hawai‘i (Assistant Registrar). Subsequently, AOAO Hawaiian Monarch filed a Notice of Association's Non-Judicial Foreclosure Under Power of Sale with the Assistant Registrar, which stated that a public auction would be held on December 3, 2012, pursuant to HRS §§ 514B-146 and 667-21 through 667-42.
Four days before the sale was scheduled to occur, Sakal filed a motion for preliminary injunction to stay the nonjudicial foreclosure sale of the property in the Circuit Court of the First Circuit (circuit court). On December 3, 2012, the circuit court denied Sakal's motion for preliminary injunction, and AOAO Hawaiian Monarch held a public auction offering Sakal's property for sale. A quitclaim deed was executed after the sale conveying Sakal's property to Jonah Scott Kogen for $50,500. The deed was then recorded in the Office of the Assistant Registrar on January 16, 2013.
On May 5, 2014, Sakal filed a complaint against AOAO Hawaiian Monarch, Kogen, and K&F 1984 LLC in the circuit court.2 The complaint alleged wrongful foreclosure against AOAO Hawaiian Monarch and common law trespass and quiet title claims against AOAO Hawaiian Monarch, Kogen, and K&F 1984 LLC.3 As to the wrongful foreclosure claim, Sakal alleged that the AOAO's bylaws did not include a power of sale that would allow it to nonjudicially foreclose on his property. Additionally, Sakal contended that the AOAO was not granted a power of sale by statute. Thus, Sakal claimed that AOAO Hawaiian Monarch's nonjudicial foreclosure was void and title should be restored to him.
Sakal further alleged that because neither AOAO Hawaiian Monarch nor Kogen had authority to enforce a nonjudicial foreclosure of an association lien, they were committing a continuing trespass on the property. Sakal requested that the circuit court declare the foreclosure auction and subsequent documents transferring title null and void and strike such documents, as well as "any and all other recorded documents relating to the wrongful foreclosure," from the records of the Office of the Assistant Registrar. Sakal also asked the circuit court to grant a preliminary and permanent injunction preventing AOAO Hawaiian Monarch and Kogen from enforcing the nonjudicial foreclosure and from trespassing on the property. Finally, Sakal prayed for actual and treble damages resulting from the foreclosure and his subsequent eviction from his property.
AOAO Hawaiian Monarch filed an answer asserting that Sakal's claim was barred by, inter alia, the applicable statute of limitations, laches, and improper service of process. Kogen did not file an answer to Sakal's complaint.
Kogen and AOAO Hawaiian Monarch filed separate motions to dismiss the complaint pursuant to Hawai‘i Rules of Civil Procedure (HRCP) Rule 12(b)(6).4 In the memorandum supporting his motion, Kogen argued that the recordation of the quitclaim deed on January 16, 2013, precluded Sakal from challenging his right to title in the property. Kogen asserted that the AOAO had, as required by HRS § 667-101(a), submitted an affidavit after the public sale of the property attesting that the sale had been lawfully conducted.5 Kogen maintained that HRS § 667-102(b) prevented Sakal from challenging his title to the property once the deed and the affidavit were recorded.6 Thus, Sakal's claims were barred, Kogen asserted, because the complaint was filed after such documents were recorded.
Additionally, Kogen argued that even if Sakal's claims were not foreclosed by section 667-102, the claims were barred by HRS § 667-60(c) (Supp. 2012), which provides that "[a]ny action to void the transfer of title to the purchaser of property pursuant to a foreclosure by power of sale" must be filed "no later than sixty days following the recording of the affidavit required by section 667-32." Because Sakal failed to file his complaint within sixty days of the recording of the affidavit, Kogen contended that the claims were barred and the complaint should be dismissed. AOAO Hawaiian Monarch's memorandum submitted in support of its motion restated Kogen's memorandum verbatim.
In opposition, Sakal argued that HRS § 667-102(b)(2) provided an exception to the time bar for claims "as otherwise provided by law." The claim was not statutorily barred, Sakal maintained, because the foreclosure was unlawful from its inception due to the AOAO's lack of a power of sale. Sakal contended that since he was challenging the validity of the foreclosure sale based on the AOAO's lack of a power of sale, the statutory bar did not apply to his claim.
Sakal also argued that the time bar set forth in HRS § 667-60(c) did not apply because the AOAO's nonjudicial foreclosure of his property was governed by part VI of HRS chapter 667 and HRS § 667-60(c) was located within part IV, making it inapplicable to the AOAO's foreclosure.
The circuit court ruled that HRS § 667-102(b)(2), which Kogen argued prevented Sakal from challenging title to the property once the deed and the affidavit were recorded, was applicable to Sakal's claim because he was a unit owner. On this basis, the court granted Kogen's and the AOAO's motions and dismissed Sakal's claims against both parties with prejudice. The circuit court thereafter issued a final judgment. Sakal timely appealed.
The Intermediate Court of Appeals (ICA) issued a published opinion that partially affirmed and partially vacated the circuit court's grant of the motions to dismiss.7 The ICA held that Sakal's wrongful foreclosure claim was not barred by HRS § 667-102 because the statute only bars claims "in and to the unit" and not all claims arising out of wrongful and unlawful nonjudicial foreclosures, such as claims for money damages. The ICA reasoned that the statute barred any claim to title to the property by Sakal because he failed to challenge the nonjudicial foreclosure of the property prior to the recordation of the affidavit and the quitclaim deed. However, the ICA concluded that Sakal had stated a claim for wrongful foreclosure on which damages could be granted because the AOAO lacked a power of sale permitting it to foreclose on Sakal's property.
Therefore, the ICA held that the circuit court erred in dismissing Sakal's complaint in its entirety against AOAO Hawaiian Monarch. The ICA vacated the dismissal of Sakal's claims for damages against the AOAO arising out of the wrongful foreclosure and remanded the case to the circuit court. The ICA affirmed the dismissal of all claims against Kogen and all claims "at law or in equity" against the AOAO "that seek right, title, or interest in and to the Property."
AOAO Hawaiian Monarch and Sakal both sought certiorari review of the ICA's judgment on appeal.8
This court reviews a trial court's ruling on a motion to dismiss de novo. Kamaka v. Goodsill Anderson Quinn & Stifel, 117 Hawai‘i 92, 104, 176 P.3d 91, 103 (2008).
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