Plaintiff Christian Sakal ("Sakal") owned unit 2806-A in the Hawaiian Monarch condominium project. Sakal was delinquent in common assessments. After unsuccessful attempts to collect the delinquency, the Association of Apartment Owners of Hawaiian Monarch ("Hawaiian Monarch") proceeded with a nonjudicial foreclosure under Hawaii Revised Statutes ("HRS") Chapter 667, Part VI. Sakal filed an action seeking an injunction to stay the nonjudicial foreclosure sale which was denied on December 3, 2012. That same day, Hawaiian Monarch held a public auction for the property subject to the unit's mortgage. Defendant Jonah Kogen ("Kogen") was the highest bidder with a purchase price of $50,500. On January 16, 2013, a quitclaim deed to Kogen for unit 2806-A was recorded.
On May 5, 2014, Sakal filed a complaint against Hawaiian Monarch and Kogen to set aside the foreclosure and for damages. Kogen filed a motion to dismiss which was granted on the grounds that Sakal was required to challenge the validity of the foreclosure prior to the recording of the quitclaim deed and that Hawaiian Monarch had the authority to foreclose nonjudicially. Hawaiian Monarch's motion to dismiss was also granted on similar grounds. Sakal filed a timely appeal.
On appeal, the Hawaii Intermediate Court of Appeals ("ICA") ruled that Hawaiian Monarch did not have the authority to foreclose nonjudicially because there was no provision in the governing documents or in an agreement with Sakal that expressly provided for a nonjudicial foreclosure. The ICA's rationale was that mortgagees must have authorization to foreclose nonjudicially in the mortgage or other agreement before they can proceed nonjudicially and the
statutes adopted by the legislature are not specific enough to determine that the legislature intended to grant that power to associations by statute. The ICA denied Hawaiian Monarch's motion for reconsideration by order filed September 19, 2018. A judgment on appeal has not been entered by the ICA at this time.
The Sakal case was decided by the ICA. Once the Judgment on Appeal is filed, a writ of certiorari will be filed by Hawaiian Monarch which will request that the Hawaii Supreme Court consider the matter on appeal.
The Hawaii Legislative Action Committee supported the amendments to the condominium statute authorizing nonjudicial foreclosure. It provided and continues to provide an important tool for associations when their delinquencies are high and when lenders are not pursuing their own foreclosures. Nonjudicial foreclosures provided relief to associations faster and with less expense. All the arguments described above should be made because the Hawaii Legislative Action Committee can present the unique perspective of having lobbied for the changes that allow associations to foreclose nonjudicially.
Status: Order rejecting application for writ or certiorari
Status: Dissenting order
Brief Author: John A Morris, Esq., M. Anne Anderson, Esq., Kapono F.H. Kiakona, Esq.
CAI Amicus Review Panel: Mr. Robert Diamond, Esq., Mr. Edmund Allcock, Esq., Mr. Henry Goodman, Esq., Mr. Marc Markel, Esq., and Mr. Steven Sugarman, Esq.