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Electronically Filed
Supreme Court
SCAP-13-0005234
27-FEB-2017
08:01 AM
IN THE SUPREME COURT OF THE STATE OF HAWAI?I
—o0o—
_______________________________________________________________
RUSSELL L. HUNGATE,
Plaintiff-Appellant,
vs.
THE LAW OFFICE OF DAVID B. ROSEN, A LAW CORPORATION,
DAVID B. ROSEN, and DEUTSCHE BANK NATIONAL TRUST COMPANY,
Defendants-Appellees.
________________________________________________________________
SCAP-13-0005234
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CAAP-13-0005234; CAAP-14-0000772; CIVIL NO. 13-1-2146;
CIVIL NO. 13-1-2146)
FEBRUARY 27, 2017
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY WILSON, J.
This case concerns a non-judicial foreclosure
conducted pursuant to Hawai?i Revised Statutes (HRS) § 667 Part I
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(Supp. 2008), which was repealed by the state legislature on
June 28, 2012 by Act 182. Plaintiff-Appellant Russell L.
Hungate (Hungate) appeals the Circuit Court of the First
Circuit’s (circuit court) order granting Defendants-Appellees
David B. Rosen’s and his law office’s (collectively, Rosen)
motion to dismiss the complaint. Hungate also appeals the
circuit court’s order granting Defendant-Appellee Deutsche Bank
National Trust Company’s (Deutsche Bank) motion to dismiss the
first amended complaint.1
On appeal, we consider whether the circuit court
wrongly dismissed Hungate’s claims alleging Deutsche Bank and
Rosen violated statutory, contractual, and common law duties,
and committed unfair or deceptive acts or practices (UDAP). We
conclude the circuit court erred in dismissing the majority of
Hungate’s claims. Accordingly, we vacate in part the circuit
court’s November 5, 2013 order granting Rosen’s motion to
dismiss, vacate in part the circuit court’s April 8, 2014 order
granting Deutsche Bank’s motion to dismiss, and remand for
further proceedings.
1
On appeal, Hungate’s case was split into two appellate case
numbers. SCAP-13-0005234 is Hungate’s appeal of the circuit court’s order
dismissing the original complaint. SCAP-14-0000772 is Hungate’s appeal of
the circuit court’s order dismissing the first amended complaint, which
Hungate filed after the circuit court dismissed his original complaint.
Hungate’s cases were consolidated by this court into SCAP-13-0005234.
2
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I. Background
Because the circuit court dismissed Hungate’s August
6, 2013 complaint and his first amended complaint, filed
December 19, 2013, pursuant to Hawai?i Rules of Civil Procedure
(HRCP) Rule 12(b)(6) (2000), we take the factual allegations
from the complaints as true for purposes of this appeal. See
Young v. Allstate Ins. Co., 119 Hawai?i 403, 406, 198 P.3d 666,
669 (2008). Hungate’s initial complaint and first amended
complaint included the following factual allegations.
A. Factual Allegations
Hungate secured a mortgage loan from IndyMac Bank,
F.S.B. (IndyMac), in the amount of $324,090 to purchase real
property in Kal?heo, Kaua?i in 2007.2 Hungate executed the
mortgage on February 10, 2007 and recorded it in the Bureau of
Conveyances on February 16, 2007. In March 2007, IndyMac
assigned its interest in Hungate’s mortgage to one of its
subsidiaries, which then assigned its interest to Deutsche Bank.
To address the possibility of foreclosure, the
mortgage contract included a power of sale clause that allowed
the property to be sold through a non-judicial foreclosure. The
power of sale clause, found in section 22 of Hungate’s mortgage,
2
At the proceeding on Rosen’s motion to dismiss, Hungate’s counsel
represented that the property was a vacant 10,000 square foot lot with ocean
views. Hungate planned to build a “dream home” on the property but he did
not proceed with his plan after he experienced financial difficulties.
3
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reads in relevant part as follows: “Lender shall publish a
notice of sale and shall sell the Property at the time and place
and under the terms specified in the notice of sale.”
On August 5, 2008, IndyMac notified Hungate that his
loan was in default because he had not made the required
payments. On January 14, 2009, an individual acting on behalf
of IndyMac3 executed a notice of mortgagee’s intention to
foreclose under power of sale. On March 16, 2009, the notice of
intention of foreclosure was properly filed at the Bureau of
Conveyances by IndyMac on behalf of Deutsche Bank as the holder
of the note. The notice offered Hungate’s property for sale
with a quitclaim deed and made no warranties.
Deutsche Bank retained Rosen, a Hawai?i-licensed
attorney, to conduct the foreclosure of Hungate’s property.
Deutsche Bank followed the non-judicial foreclosure process set
forth in HRS § 667 Part I.4
To begin the non-judicial foreclosure process, Rosen
published a notice of sale in The Garden Island, a newspaper of
general circulation, as required by former HRS § 667-5(a)(1)
(Supp. 2008). Under HRS § 667-5(a)(1), the attorney must
3
The record is unclear as to whether the individual was employed
by IndyMac or another entity.
4
An alternative non-judicial foreclosure process with additional
statutory requirements, codified in HRS § 667 Part II (Supp. 2008), was also
available.
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publish the notice of the mortgagee’s intention to foreclose
“once in each of three successive weeks . . . in a newspaper
having a general circulation in the county in which the
mortgaged property lies[.]” In compliance with this
requirement, Rosen published a notice of sale once a week for
three weeks on March 20, March 27, and April 3, 2009. The
notice of sale stated a sale date of April 17, 2009.5
Rosen then postponed the sale a total of four times in
2009: from April 17 to May 15, from May 15 to June 12, from June
12 to July 17, and from July 17 to August 14. These dates were
never published. Whether the postponement was publicly
announced to the bidders who attended each sale date, as
required by HRS § 667-5(d), is contested.
At the August 14, 2009 sale, Deutsche Bank was the
sole bidder with a winning credit bid of approximately $161,250.
This amount was substantially below the market value of
Hungate’s property. A “Mortgagee’s Grant Deed Pursuant to Power
of Sale” was recorded at the Bureau of Conveyances on October
30, 2009 by Deutsche Bank.
B. Procedural History
On August 6, 2013, Hungate filed his initial complaint
against Rosen and Deutsche Bank. Hungate contended that
5
The notice states, in relevant part, that the mortgagee “gives
notice that Mortgagee will hold a sale by public auction on April 17, 2009 at
12:00 noon At [sic] the flagpole fronting the fifth circuit court building.”
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Deutsche Bank and Rosen wrongfully conducted the foreclosure of
Hungate’s property by (1) advertising a proposed sale date 28
days after the date of the first published notice, when HRS §
667-76 required that the sale date be at least 29 days after the
first published notice; (2) failing to publicize the postponed
sale date, in violation of the mortgage’s power of sale clause;
and (3) breaching their common law duty to secure the best
possible price for the property. Hungate also argued that
Deutsche Bank and Rosen violated HRS § 480-27 because their
actions constituted unfair and deceptive trade acts or practices
and resulted in unfair methods of competition.
Rosen filed a motion to dismiss under HRCP Rule
12(b)(6). Rosen argued (1) the initial sale date was scheduled
after the expiration of four weeks, when including the date
first advertised, and thus he complied with HRS § 667-7; (2)
6
HRS § 667-7 (Supp. 2008) states as follows:
(a) The notice of intention of foreclosure shall contain:
(1) A description of the mortgaged property; and
(2) A statement of the time and place proposed for
the sale thereof at any time after the
expiration of four weeks from the date when
first advertised.
(b) The affidavit described under section 667-5 may
lawfully be made by any person duly authorized to act
for the mortgagee, and in such capacity conducting
the foreclosure.
7
HRS § 480-2(a) (2008) states that “[u]nfair methods of
competition and unfair or deceptive acts or practices in the conduct of any
trade or commerce are unlawful.”
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publication of a sale postponement notice was not required by
HRS § 667-5(d)8 or the mortgage;9 and (3) Rosen is not liable to
Hungate because Rosen did not owe a duty of care to Hungate, a
non-client.
On November 5, 2013, the circuit court granted Rosen’s
motion to dismiss.10 The court ruled that (1) Rosen complied
with HRS §§ 667-5 and 667-7 as a matter of law; (2) HRS § 667-
5(d) and the power of sale clause of the mortgage did not
require publication of the postponement of the non-judicial
foreclosure sale; (3) Hungate lacked standing to assert claims
under HRS chapter 480; and (4) Hungate’s common law claims were
foreclosed because Rosen did not owe a duty to Hungate.
On December 19, 2013, Hungate filed his first amended
complaint against Rosen and Deutsche Bank. The claims were
nearly identical to those alleged in the initial complaint.11
8
HRS § 667-5(d)(Supp. 2008) states in relevant part as follows:
“Any sale, of which notice has been given . . . may be postponed from time to
time by public announcement made by the mortgagee or by a person acting on
the mortgagee’s behalf.”
9
Rosen noted that the notice of mortgagee’s intention to foreclose
under power of sale stated that “[t]his sale may be postponed from time to
time by public announcement made by Mortgagee or someone acting on
Mortgagee’s behalf.” (Emphasis omitted).
10
The Honorable Rhonda A. Nishimura presided.
11
In addition to the claims raised in the initial complaint,
Hungate alleged that Deutsche Bank’s practice of granting quitclaim deeds,
rather than limited warranty deeds, was an unfair and deceptive trade
practice. This claim is not an issue before the court.
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Deutsche Bank filed a motion to dismiss the first
amended complaint, making arguments similar to those presented
by Rosen.
On April 8, 2014, the circuit court granted in part12
Deutsche Bank’s motion to dismiss Hungate’s first amended
complaint. As with its prior dismissal of Hungate’s August 6,
2013 complaint, the court ruled that (1) Deutsche Bank complied
with the notice requirement under HRS §§ 667-5 and 667-7 as a
matter of law, and (2) HRS § 667-5(d) and the power of sale
clause did not require that postponements of sale be published.
After appealing to the Intermediate Court of Appeals,
the parties filed applications for transfer that were
subsequently granted by this court.
II. Standards of Review
A. Motion to Dismiss
The circuit court’s grant of a motion to dismiss is
reviewed de novo. Kamaka v. Goodsill Anderson Quinn & Stifel,
117 Hawai?i 92, 104, 176 P.3d 91, 103 (2008), as amended (Jan.
25, 2008). Further, the appellate court must accept the
allegations made in the complaint as true and “view them in the
12
The circuit court stayed Hungate’s claim regarding Deutsche
Bank’s use of quitclaim deeds pending the appeals in Lima v. Deutsche Bank
National Trust Co., No. 13-16091 (9th Cir. filed May 30, 2013); Gibo v.
United States Bank National Ass’n, No. 13-16092 (9th Cir. filed May 30,
2013); and Bald v. Wells Fargo Bank, N.A., No. 13-16622 (9th Cir. filed Aug.
12, 2013), which raised the same or similar issues.
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light most favorable to the plaintiff[s]; dismissal is proper
only if it ‘appears beyond doubt that the plaintiff[s] can prove
no set of facts in support of [their] claim[s] that would
entitle [them] to relief.’” Wong v. Cayetano, 111 Hawai?i 462,
476, 143 P.3d 1, 15 (2006)(citations omitted). “However, in
weighing the allegations of the complaint as against a motion to
dismiss, the court is not required to accept conclusory
allegations on the legal effect of the events alleged.” Pavsek
v. Sandvold, 127 Hawai?i 390, 403, 279 P.3d 55, 68 (App. 2012)
(citation omitted).
B. Statutory Interpretation
Statutory interpretation is reviewable de novo.
Citizens Against Reckless Dev. v. Zoning Bd. of Appeals, 114
Hawai?i 184, 193, 159 P.3d 143, 152 (2007). When construing
statutes, the court is governed by the following rules:
First, the fundamental starting point for statutory
interpretation is the language of the statute itself.
Second, where the statutory language is plain and
unambiguous, our sole duty is to give effect to its plain
and obvious meaning. Third, implicit in the task of
statutory construction is our foremost obligation to
ascertain and give effect to the intention of the
legislature, which is to be obtained primarily from the
language contained in the statute itself. Fourth, when
there is doubt, doubleness of meaning, or indistinctiveness
or uncertainty of an expression used in a statute, an
ambiguity exists.
When there is ambiguity in a statute, “the meaning of
the ambiguous words may be sought by examining the context,
with which the ambiguous words, phrases, and sentences may
be compared, in order to ascertain their true meaning.”
Moreover, the courts may resort to extrinsic aids in
determining legislative intent, such as legislative
history, or the reason and spirit of the law.
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Id. at 193-94, 159 P.3d at 152-53 (citations omitted).
C. Interpretation of Contracts
“[T]he construction and legal effect to be given a
contract is a question of law freely reviewable by an appellate
court.” Hawaiian Ass’n of Seventh-Day Adventists v. Wong, 130
Hawai?i 36, 45, 305 P.3d 452, 461 (2013)(citation omitted).
III. Discussion
Taking the facts alleged in Hungate’s complaints as
true, the circuit court improperly dismissed Hungate’s initial
complaint and first amended complaint. In reaching this
conclusion, we assess Hungate’s claims against Deutsche Bank and
Rosen, respectively.
In Part A, we hold the circuit court erred in
dismissing the majority of Hungate’s claims against Deutsche
Bank regarding the alleged HRS chapter 667 Part I violations.
Additionally, we conclude the mortgage’s power of sale clause
required Deutsche Bank to publish all postponements of the
foreclosure sale. Regarding Hungate’s HRS chapter 667 Part I
claims against Rosen, we conclude that the statute required
Rosen (1) to give proper notice of the sale date under former
HRS § 667-7 and (2) to give notice of the postponements of the
sale in accordance with the mortgage’s power of sale clause per
former HRS § 667-5. However, we hold that those statutory
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provisions do not create a private right of action against the
attorney of a foreclosing mortgagee. We conclude Hungate does
not have a cause of action against Rosen under former HRS § 667-
5 and his claims against Rosen based upon the mortgage’s power
of sale clause cannot stand.
In Part B, we determine that Deutsche Bank had a
common law duty to Hungate to use reasonable means to obtain the
best price for Hungate’s property. In Part C we hold that the
circuit court erred in dismissing Hungate’s unfair or deceptive
acts or practices claim against Deutsche Bank, but properly
dismissed Hungate’s UDAP claim against Rosen.
A. The Circuit Court Erred in Dismissing the Majority of
Hungate’s Claims Alleging HRS Chapter 667 Part I Violations
against Deutsche Bank
Hungate alleges that Deutsche Bank and Rosen
improperly conducted the foreclosure sale of Hungate’s property.
Specifically, Hungate contends Rosen and Deutsche Bank: (1)
advertised a foreclosure date earlier than permitted under HRS
§ 667 Part I; (2) failed to publish the notices of postponements
of the sale as was required by the power of sale clause; and (3)
improperly permitted a non-attorney to prepare and sign the
notice of sale.
We hold that the circuit court erred in dismissing
Hungate’s complaints against Deutsche Bank on the basis of the
first two allegations. As to the third allegation, former HRS
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§ 667-5 does not require a Hawai?i-licensed attorney to prepare
and sign a notice of sale, and we affirm in part the circuit
court’s April 8, 2014 order dismissing Hungate’s first amended
complaint.
Regarding the allegations against Rosen, we conclude
that Hungate does not have a cause of action against Rosen for
violating statutory requirements under HRS chapter 667, or for
his failure to adhere to the requirements of the mortgage’s
power of sale clause.
1. HRS § 1-29 Governs the Scheduling of a Foreclosure Sale
Under Former HRS § 667 Part I13
Former HRS § 667-7(a)(2) required that “[t]he notice
of intention of foreclosure shall contain: . . . A statement of
the time and place proposed for the sale [of the mortgaged
property] at any time after the expiration of four weeks from
the date when first advertised.” (Emphasis added). Thus,
13
The events at issue here occurred between 2007 and 2009. In the wake
of the mortgage crisis, the legislature formed a Mortgage Foreclosure
Task Force in 2010. See 2010 Haw. Sess. Laws, Act 162, § 2, at 375.
The Task Force recommended extensive changes to the Hawai?i foreclosure
statute in reports to the legislature in December 2010 and December
2011, and many of those changes were subsequently enacted by the
legislature in the 2011 and 2012 legislative sessions. See generally
Final Report of the Mortgage Foreclosure Task Force to the Legislature
for the Regular Session of 2012 (December 2011); see also 2011 Haw.
Sess. Laws, Act 48 at 84; 2012 Haw. Sess. Laws, Act 182, at 630. Among
other things, those revisions imposed UDAP liability on foreclosing
mortgagees for a series of specific violations of the statutory
procedures which now govern nonjudicial foreclosure. HRS § 667-60
(2016).
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whether the advertised sale date on April 17, 2009 was “after
the expiration of four weeks” is the crux of this issue.
Hungate contends that HRS § 1-29 is the proper method
to calculate whether Deutsche Bank and Rosen complied with HRS
§ 667-7. HRS § 1-29 (2009) provides that time periods are
calculated “by excluding the first day and including the
last[.]” Under Hungate’s analysis, Deutsche Bank and Rosen
advertised a foreclosure sale date that was exactly 28 days from
the date the notice was published, and therefore the sale was
not scheduled “after the expiration of four weeks.”
Deutsche Bank and Rosen argue that we should apply the
time computation rule set forth in Silva v. Lopez, which
required that we “include the day of the first publication and
exclude the day the act is advertised to be done.” Silva, 5
Haw. 262, 270 (Haw. Kingdom 1884). The time computation rule of
Silva indicates that Deutsche Bank and Rosen advertised a sale
date in compliance with the four-week requirement.
We hold that HRS § 1-29 is the appropriate computation
rule. In 1923, the Hawai?i legislature passed Act 3, the
predecessor to HRS § 1-29, which set forth a time computation
rule that is substantially the same as HRS § 1-29. 1923 Haw.
Sess. Laws Act 3, § 1 at 2. To explain the necessity of Act 3,
the chair of the House Judiciary Committee noted that “under our
existing statutes no definition is given nor method supplied in
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the computation of time for the performance or completion of an
Act under contract or legal requirement[.]” H. Stand. Comm.
Rep. No. 9, in 1923 House Journal, at 97. Due to the absence of
a time computation provision, he explained that “numerous
interpretations [of time computation] based principally on the
decisions of other courts and jurisdictions” resulted. Id.
Silva is one such case that used the decisions of other courts
to determine a time computation rule. Specifically, the Silva
court cited a New Hampshire case in deciding that the day an act
occurred was included in computing time. Silva, 5 Haw. at 262.
By passing Act 3, which became HRS § 1-29, the Hawai?i
legislature outlined the procedure by which we now calculate
time. Thus, HRS § 1-29 sets forth the computation rule to be
used when calculating the scheduling of foreclosure sales
pursuant to HRS § 667 Part I.
HRS § 1-29 mandates that the earliest date for the
sale of Hungate’s property was April 18, 2009, and thus Deutsche
Bank did not give the requisite amount of notice. HRS § 1-29
states that “[t]he time in which any act provided by law is to
be done is computed by excluding the first day and including the
last[.]” Combined with the “after the expiration of four weeks”
language from HRS § 667-7(a)(2), HRS § 1-29 requires that March
20, 2009, the date Deutsche Bank and Rosen first published the
notice of sale, be excluded from the notice calculation as it
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was “the first day.” Counting four weeks—28 days—from March
21, 2009, results in the earliest possible sale date falling on
April 18, 2009. Accordingly, the circuit court erred in
determining that a sale date of April 17, 2009 complied with the
requirements of HRS § 667-7.
2. The Power of Sale Clause Required Deutsche Bank to
Publish Postponements of the Foreclosure Sale
Hungate argues that Deutsche Bank and Rosen were
required to publish all postponements of the April 17, 2009 sale
date for two reasons: (1) the original sale date advertised in
the notice was one day early and thus notice was not properly
given, and (2) the power of sale clause of Hungate’s mortgage
required publication of postponements of the foreclosure sale.
Deutsche Bank and Rosen contend the power of sale
clause cannot require publication of postponements because
former HRS § 667-5(d)(Supp. 2008) allows for sales to be
postponed “from time to time by public announcement[.]” This
section presupposes, however, that “notice has been given” in
accordance with HRS § 667-7(a)(2).14 Former HRS § 667-5(d). As
noted supra, Deutsche Bank did not comply with the time
computation required by HRS § 667-7(a)(2) and thus did not, as
14
Because former HRS §§ 667-5 and 667-7 are in pari materia,
inasmuch as they both discuss the notice of intention of foreclosure, we read
the two statutes together. See HRS § 1-16 (2009) (“Laws in pari materia, or
upon the same subject matter, shall be construed with reference to each
other.”).
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required by HRS § 667-5(d), give proper notice. Therefore,
Deutsche Bank cannot avail itself of the public announcement
postponement method in HRS § 667-5(d).
Even assuming Deutsche Bank provided timely notice of
the date of sale by public announcement, Hungate contends
Deutsche Bank was required—pursuant to former HRS § 667-
5(a)(2)—to publish all postponements of the foreclosure sale in
compliance with the mortgage’s power of sale clause. HRS § 667-
5(a)(2) states that the attorney shall “[g]ive any notices and
do all acts as are authorized or required by the power [of sale]
contained in the mortgage.” (Emphasis added). Thus, if the
mortgage’s power of sale clause requires more than what is
required under HRS § 667 Part I, the mortgagee must follow the
requirements of the power of sale clause. The relevant portion
of the power of sale clause of Hungate’s mortgage states: “If
Lender invokes the power of sale, . . . Lender shall publish a
notice of sale and shall sell the Property at the time and place
and under the terms specified in the notice of sale.” (Emphases
added). Under Hungate’s interpretation of the clause, any
change in the time, place, or terms specified in the notice of
sale, which includes the date, time, and place of the sale,
requires the lender to publish a new notice of sale with the new
terms.
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In contrast to Hungate’s position, Deutsche Bank and
Rosen interpret the power of sale clause to allow postponement
by public announcement because the notice of sale expressly
permits oral postponement. The power of sale clause states that
the mortgagee “shall sell the Property at the time and place and
under the terms specified in the notice of sale.” (Emphasis
added). Because the notice of sale expressly states that the
sale “may be postponed from time to time by public announcement
made by Mortgagee or someone acting on Mortgagee’s behalf,”
Deutsche Bank and Rosen assert that oral postponement complied
with the “terms specified in the notice of sale.” According to
Deutsche Bank’s and Rosen’s analysis of the power of sale
clause, only a single notice must be published, and not “a
notice of sale for each postponed date.” (Emphasis added)
(citing Lima v. Deutsche Bank Nat’l Trust Co., 943 F. Supp. 2d
1093, 1101 (D. Haw. 2013)). Thus, under Deutsche Bank’s and
Rosen’s interpretation of the power of sale clause, once a
notice of sale is published, the power of sale is complied with
as long as future postponements are publicly announced orally at
the time of the scheduled sale.
Because there are two reasonable interpretations of
the power of sale clause, an ambiguity exists as to whether a
new notice must be published to postpone the foreclosure sale.
See Wong, 130 Hawai?i at 45, 305 P.3d at 461 (explaining a
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contract is ambiguous “when its terms are reasonably susceptible
to more than one meaning”). The application of contract
interpretation principles to resolve the power of sale clause’s
ambiguity supports the conclusion that Deutsche Bank was
required to publish postponement notices. “[A]ny ambiguity in a
mortgage instrument should be construed against the party
drawing the documents,” State Sav. & Loan Ass’n v. Kauaian Dev.
Co., 62 Haw. 188, 198, 613 P.2d 1315, 1322 (1980), or in other
words, “against the party who supplies the words[.]”
Restatement (Second) of Contracts § 206 (Am. Law Inst. 1981).
The ambiguity in the power of sale clause should thus be
resolved against Deutsche Bank, as the party who supplied the
words of the contract. Thus, the more stringent interpretation,
which requires postponements of the sale be published through a
new notice, prevails. Accordingly, the circuit court should not
have dismissed Hungate’s complaints based on its reasoning that
Deutsche Bank was not required to publish all postponements of
the foreclosure sale.
3. A Hawai?i-licensed Attorney Is Not Required to Prepare or
Sign a Notice of the Mortgagee’s Intention to Foreclose
Former HRS § 667-5 (Supp. 2008) requires a mortgagee
foreclosing under a power of sale “be represented by an attorney
who is licensed to practice law in the State and is physically
located in the State.” HRS § 667-5(a). The attorney must
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“[g]ive notice of the mortgagee’s . . . intention to foreclose
the mortgage and of the sale . . . by publication” and “[g]ive
any notices and do all acts as are authorized or required by the
power contained in the mortgage.” HRS § 667-5(a)(1)-(2).
Hungate contends that Deutsche Bank did not comply with HRS
§ 667-5 because the notice of sale for Hungate’s property was
not prepared and signed15 by an attorney licensed in Hawai?i.16
The language of former HRS § 667-5 does not require a
Hawai?i-licensed attorney to prepare or sign the notice. Our
“fundamental starting point for statutory interpretation is the
language of [HRS § 667-5] itself.” Citizens Against Reckless
Dev., 114 Hawai?i at 193, 159 P.3d at 152. HRS § 667-5 only
requires an attorney to “give notice” and “do all acts as are
authorized or required” by the power of sale. HRS § 667-
5(a)(1)-(2). Neither of these requirements involves the
preparation and signing of a notice. The language of the
statute itself thus does not provide that a Hawai?i-licensed
attorney is required to prepare or sign a notice.
15
Hungate also uses the terminology that a non-attorney “published”
the notice. But, as Deutsche Bank notes, Hungate stated in his opening brief
in CAAP-13-0005234 that “Rosen caused to be published [the notice of sale] in
the Kauai publication The Garden Island.”
16
Deutsche Bank argues that Hungate waived this issue because it
was not properly raised at trial. Hungate explains that this issue was
raised in his memorandum in opposition to the motion to dismiss. Assuming
arguendo that this claim was not waived, this claim is nonetheless meritless.
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Additionally, the legislative history of HRS § 667-5
does not evince the intent that a Hawai?i-licensed attorney
prepare or sign a notice of the mortgagee’s intention to
foreclose. The legislature’s purpose in enacting HRS § 667-5
was to ensure that where a power of sale clause is included in
the mortgage, interested parties be able to request and timely
receive information. See Conf. Comm. Rep. No. 3-08, in 2008
House Journal, at 1710, 2008 Senate Journal, at 793; S. Stand.
Comm. Rep. No. 2108, in 2008 Senate Journal, at 917. To
accomplish this, the legislature required a mortgagee to hire a
Hawai?i-licensed attorney, who is physically present in the
state, to serve as a “contact individual” in order to facilitate
the providing of information. S. Stand. Comm. Rep. No. 2108, in
2008 Senate Journal, at 917. A Hawai?i-licensed attorney must
therefore serve as a contact individual and provide notice of a
mortgagee’s intent to foreclose on a property—but the
legislative history contains no indication of legislative intent
that the attorney prepare or sign a notice of the mortgagee’s
intention to foreclose.
Accordingly, the circuit court properly dismissed
Hungate’s first amended complaint as to his claim that a non-
attorney prepared and signed the notice of sale.
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4. Former HRS §§ 667-5 and 667-7 Create No Private Right of
Action Against a Foreclosing Mortgagee’s Attorney
Hungate contends Rosen owed statutory duties under HRS
§§ 667-5 and 667-7. In response, Rosen argues former HRS § 667-5
fails to involve the kind of “special relationship” between
Hungate and Rosen necessary for an attorney to owe a duty to a
non-client. Generally, a duty imposed on an attorney in favor
of an adversary of the attorney’s client poses an “unacceptable
conflict of interest.” Buscher v. Boning, 114 Hawai?i 202, 220,
159 P.3d 814, 832 (2007). For that reason, absent special
circumstances, attorneys owe no duty of care to non-clients. See
id. The question raised here is whether the requirements of
former HRS § 667-5 and former HRS § 667-7 impose duties that may
be enforced against the attorney of a foreclosing mortgagee
under a private right of action.
Requirements imposed by statutes do not necessarily
give rise to a private right of action. Cannon v. University of
Chicago, 441 U.S. 677, 688 (1979)(noting that the fact that a
“statute has been violated and some person harmed does not
automatically give rise to a private cause of action in favor of
that person”). In considering whether a duty imposed by statute
creates a private right of action, our court has consistently
focused on the intent of the legislature. Whitey’s Boat
Cruises, Inc. v. Napali-Kauai Boat Charters, Inc., 110 Hawai?i
21
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302, 312, 132 P.3d 1213, 1223 (2006). We review such questions
de novo as a matter of law. Namauu v. City & Cty. of Honolulu,
62 Haw. 358, 362, 614 P.2d 943, 946 (1980)(noting that “the
nature and extent of duty imposed by statute is a matter of
law”).
The language of former HRS § 667-5, as amended in
2008, indicates the legislature intended attorneys to provide
notice of the mortgagee’s intention to foreclose and notice of
the sale of the mortgaged property; the language also shows the
legislature intended attorneys to comply with the power of sale
clause in the mortgage. Former HRS § 667-5(a) explicitly states
that “[t]he attorney shall[] . . . [g]ive notice of the
mortgagee’s . . . intention to foreclose the mortgage and of the
sale of the mortgaged property.” (Emphasis added). In
addition, the attorney “shall . . . do all acts as are
authorized or required by the power contained in the mortgage,”
such as complying with the power of sale clause of the mortgage.
Former HRS § 667-5(a)(2) (emphasis added). An attorney thus is
required under the statute to give proper notice and to perform
all acts authorized or required by the power of sale clause.17
Although Rosen failed to follow some requirements of former HRS
17
Former HRS § 667-5(d), however, permits the mortgagee or “some
person acting on the mortgagee’s behalf”—not necessarily an attorney—to
postpone the sale by public announcement.
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§ 667-5, we hold that the statute did not create a cause of
action against attorneys who fail to follow its requirements.
In determining whether a private cause of action
should be recognized based on statutory requirements, we
consider the following factors: (1) whether the plaintiff is
“one of the class for whose especial benefit the statute was
enacted”; (2) whether there is “any indication of legislative
intent, explicit or implicit, either to create such a remedy or
to deny one”; and (3) whether a private cause of action would be
“consistent with the underlying purposes of the legislative
scheme to imply such a remedy for the plaintiff.” Whitey’s Boat
Cruises, 110 Hawai?i at 312, 132 P.3d at 1223. While each factor
is relevant, “the key factor” is whether the legislature
“intended to provide the plaintiff with a private right of
action.” Id. at 313 n.20, 132 P.3d at 1224 n.20; see also
Touche Ross & Co. v. Redington, 442 U.S. 560, 575 (noting that
the three factors used to assess whether a private cause of
action may be implied from statutory language ultimately “are
ones traditionally relied upon in determining legislative
intent”).
We first consider whether Hungate was a member of the
class for whose special benefit the statute was enacted. As
discussed supra, the statute was amended to benefit the “party
in breach of the mortgage agreement.” H. Stand. Comm. Rep. No.
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1192, in 2008 House Journal, at 1450. As the party in breach of
the mortgage contract, Hungate falls within the class for whom
the statute was enacted.
The second factor considers whether there is “any
indication of legislative intent, explicit or implicit, either
to create such a remedy or to deny one.” Whitey’s Boat Cruises,
Inc., 110 Hawai?i at 312, 132 P.3d at 1223. Former HRS § 667-5
and its legislative history are silent as to whether the
legislature intended to create a cause of action on behalf of
the mortgagor against the mortgagee’s lawyer.18 “[I]mplying a
private right of action on the basis of [legislative] silence is
a hazardous enterprise, at best.” Touche Ross & Co, 442 U.S. at
571. Nonetheless, legislative silence alone is not dispositive.
See 1A C.J.S. Actions § 62 (2016)(when a statute is silent, a
court may infer a statutory private right of action where there
is strong evidence that “the statutory scheme” implies it).
We turn, then, to the third factor, whether a private
cause of action would be consistent with “the underlying
purposes of the legislative scheme.” Whitey’s Boat Cruises,
Inc., 110 Hawai?i at 312, 132 P.3d at 1223. Here, amendments to
the foreclosure process set forth in HRS chapter 667 Part I were
intended to “expand[] the rights of mortgagors.” Kondaur
18
HRS § 667-4 (1993) does provide the mortgagor may defend against
foreclosure.
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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”).
However, 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 statute
was not amended to regulate attorneys representing mortgagees.
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).
The committee reports explain that potential buyers
and other interested parties faced difficulties in obtaining
updated information regarding foreclosure sales from banks and
entities located outside of Hawai?i: “A large number of Hawaii
foreclosures are handled by servicing corporations located on
the mainland that provide little to no information relating to
the foreclosure to parties that are entitled to information
regarding the property to be foreclosed.” Conf. Comm. Rep. No.
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3-08, in 2008 House Journal, at 1710, 2008 Senate Journal, at
793. Due to the growing concern that mortgagees were creating
obstacles for parties seeking information, the legislature
required a mortgagee to hire a Hawai?i-licensed attorney, who is
physically present in the state, to serve as a “contact
individual.” S. Stand. Comm. Rep. No. 2108, in 2008 Senate
Journal, at 917. The legislature concluded that a “Hawaii-based
attorney will ensure that interested parties have a means to
obtain information from a person with a local presence and the
ability to provide useful information.” Conf. Comm. Rep. No. 3-
08, in 2008 House Journal, at 1710, 2008 Senate Journal, at 793.
Thus, the underlying structure and intent of the amendment was
to enable interested parties to request and receive information
in a timely manner from mortgagees, and not to regulate
attorneys’ conduct. Permitting a mortgagor to assert a claim
against the foreclosing mortgagee’s attorney for failure to
comply with former HRS § 667-5 falls outside this statutory
scheme.
We also consider the further factor of whether
“additional remedies are unnecessary” when determining whether
to recognize a new cause of action. Best Place, Inc. v. Penn
America Ins. Co., 82 Hawai?i 120, 126, 920 P.2d 334, 340 (1996).
In this case, creating a cause of action under former HRS § 667-
5 is not necessary to protect the interests of the mortgagor.
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Rather, the mortgagor can protect its interests through filing a
claim against the mortgagee for wrongful foreclosure. See
Santiago v. Tanaka, 137 Hawai?i 137, 158-59, 366 P.3d 612, 633-
34 (2016) (holding the nonjudicial foreclosure was wrongful and
awarding restitution to mortgagor). When voiding the
foreclosure is not possible, the mortgagor is entitled to
“restitution of their proven out-of-pocket losses” through a
wrongful foreclosure claim. Id. at 158, 366 P.3d at 633.
Because mortgagees could be required to provide restitution to
injured mortgagors under a wrongful foreclosure claim, a
“sufficient incentive” exists for mortgagees to ensure that the
foreclosure proceedings are correctly performed by attorneys.
Best Place, Inc., 82 Hawai?i at 127, 920 P.2d at 341. The
interests of the mortgagor are thus protected.
In sum, we conclude that recognizing a cause of action
based upon former HRS § 667-5 is not warranted. Because former
HRS §§ 667-5 and 667-7 are in pari materia, inasmuch as they
both discuss the notice of intention of foreclosure, we read the
two statutes together. See HRS § 1-16 (2009) (“Laws in pari
materia, or upon the same subject matter, shall be construed
with reference to each other.”). Accordingly, for the same
reasons Hungate cannot assert a cause of action against Rosen
under HRS § 667-5, he cannot assert a claim under HRS § 667-7.
Hungate also makes a contract-based argument that
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Rosen was required to adhere to the mortgage’s power of sale
clause because former HRS § 667-5(a)(2) states that the attorney
shall “[g]ive any notices and do all acts as are authorized or
required by the power [of sale] contained in the mortgage.”
However, Hungate’s ability to make this contract-based claim
ultimately relies upon the availability of a cause of action
under former HRS § 667-5. As discussed supra, Hungate cannot
assert a viable cause of action against Rosen under HRS § 667-5;
thus, his contract-based claim does not stand.
B. Deutsche Bank Must Use Reasonable Means to Obtain the Best
Price for a Foreclosed Property
In addition to Hungate’s allegations that Deutsche
Bank and Rosen violated HRS § 667 Part I and the mortgage
contract, Hungate asserts that Deutsche Bank violated common law
duties established in Silva and Ulrich v. Sec. Inv. Co., 35 Haw.
158 (Haw. Terr. 1939). Quoting Ulrich, Hungate contends that
failing to give proper notice under former HRS § 667-7(a)(2) and
failing to publish postponement announcements as required by the
mortgage’s power of sale clause constituted violations of the
common law duty to “use all fair and reasonable means in
obtaining the best prices for the property on sale[.]” Ulrich,
35 Haw. at 168. We agree. In reaching this conclusion, we
first discuss the duty owed by mortgagees under Ulrich. We then
address the burden of the mortgagee who purchases the foreclosed
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property to demonstrate that the foreclosure sale was “regularly
and fairly conducted” and that “an adequate price” was paid by
the mortgagee. Ulrich, 35 Haw. at 168.
1. Deutsche Bank Owes a Common Law Duty to Hungate
We recently reaffirmed Ulrich and recognized that this
common law duty extends to mortgagees conducting non-judicial
foreclosure sales of real property. See Kondaur Capital Corp.
v. Matsuyoshi, 136 Hawai?i 227, 361 P.3d 454 (2015). At the
time Ulrich was decided, the law did not distinguish between
real property and chattel mortgages;19 accordingly, the court did
not limit Ulrich’s holding to chattel mortgages. See RLH §
19
The statutory provisions governing non-judicial foreclosures when
Ulrich was decided were Revised Laws of Hawai?i (RLH) §§ 4724-4728 (1935).
Ulrich, 35 Haw. at 163. RLH § 4724, the former version of HRS § 667-5,
provided as follows:
Notice of foreclosure; affidavit after sale. When a power
of sale is contained in a mortgage, the mortgagee, or any
person having his estate therein, or authorized by such
power to act in the premises, may, upon a breach of the
condition, give notice of his intention to foreclose the
mortgage, by publication of such notice in the English
language once in each of three successive weeks, the first
publication to be not less than twenty-eight days before
the day of sale, and the last publication to be not less
than fourteen days before the day of sale, in a newspaper
published either in the county in which the mortgaged
property lies, or in Honolulu, and having a circulation in
such county; and also give such notices and do all such
acts as are authorized or required by the power contained
in the mortgage. He shall, within thirty days after
selling the property in pursuance of the power, file a copy
of the notice of sale and his affidavit, setting forth his
acts in the premises fully and particularly, in the bureau
of conveyances, in Honolulu. The affidavit and copy of the
notice shall be recorded by the registrar, with a notice of
reference thereto in the margin of the record of the
mortgage deed, if recorded in his office.
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4724; Kondaur, 136 Hawai?i at 240, 361 P.3d at 467 (analyzing
RLH § 4727); Ulrich, 35 Haw. at 163-68. In Kondaur, we
explained that Ulrich’s rationale, to protect the mortgagor from
being “wrongfully and unfairly taken advantage of by the
mortgagee,” applies with equal force to non-judicial foreclosure
sales of real property. Kondaur, 136 Hawai?i at 240, 361 P.3d
at 467. Mortgagors of both real and personal property therefore
continue to benefit from the protections set forth in Ulrich.
Id. at 240, 361 P.3d at 467. Accordingly, under Kondaur and
Ulrich, in addition to the duties required under the now-
repealed HRS § 667 Part I, a mortgagee has a duty to use “fair
and reasonable means in obtaining the best prices for the
property on sale.” Id. at 235, 361 P.3d at 462 (citing Ulrich,
35 Haw. at 168); see also Silva, 5 Haw. at 265 (requiring the
mortgagee “to use discretion in an intelligent and reasonable
manner, not to oppress the debtor or to sacrifice his estate”).
We further clarify that the mortgagee’s duty to seek
the best price under the circumstances does not require the
mortgagee to obtain the fair market value of the property.
Indeed, “[m]any commentators have observed that the foreclosure
process commonly fails to produce the fair market value for
foreclosed real estate.” Restatement (Third) of Prop.:
Mortgages § 8.3 cmt. a (Am. Law Inst. 1997). There are several
reasons why foreclosure sales fail to attract fair market value
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bids, such as the difficulty in inspecting the subject
properties, technical publication notices, marketable title
concerns, and the lack of a willing seller. Id.; see also First
Bank v. Fischer & Frichtel, Inc., 364 S.W.3d 216, 226 (Mo. 2012)
(en banc) (Teitelman, C.J., dissenting) (stating “‘it is well
known that property, when sold at a forced sale, usually does
not bring its full value’ and, instead, ‘has the potential of
bringing only a fraction of the fair market value’” (citations
omitted)). While final bids on foreclosed property need not
equate to fair market values, the mortgagee nonetheless has a
duty to use fair and reasonable means to conduct the foreclosure
sale in a manner that is conducive to obtaining the best price
under the circumstances.
2. Deutsche Bank Carries the Additional Burden to
Demonstrate a Regular and Fair Sale and an Adequate Sale
Price
In addition to the duty of a mortgagee to use fair and
reasonable means to obtain the best price for the property, a
mortgagee who purchases the foreclosed property has the burden
to show that the sale was “regularly and fairly conducted” and
that “an adequate price” was paid under the circumstances.
Ulrich, 35 Haw. at 168; see also Kondaur, 136 Hawai?i at 241-42,
361 P.3d at 468-69. As we explained in Kondaur, “[i]n instances
where the mortgagee assumes the role of a purchaser in a self-
dealing transaction, the burden is on the mortgagee . . . to
31
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establish its compliance with these obligations.” Id. at 240,
361 P.3d at 467. This burden properly falls on the mortgagee
because in choosing to conduct the non-judicial foreclosure sale
under HRS § 667 Part I, the mortgagee elects a position superior
to the mortgagor with a duty to treat the mortgagor fairly and
without resorting to the advantage derived from its authority to
conduct the sale.
There is no neutral party, such as a court,
supervising the sale and ensuring a fair and reasonable process.
When the non-judicial foreclosure sale results in the mortgagee
purchasing the property, it is therefore imperative that the
mortgagee establish that this result occurred after a fairly
conducted sale. Id. at 241-43, 361 P.3d at 468-70.
Accordingly, because Deutsche Bank purchased Hungate’s property,
Deutsche Bank has the burden to establish that the sale was
fairly conducted and resulted in an adequate price under the
circumstances. Id. at 240-42, 361 P.3d at 467-69.
C. The Circuit Court Erred in Dismissing Hungate’s Unfair or
Deceptive Acts or Practices Claim Against Deutsche Bank,
but Properly Dismissed Hungate’s Claim Against Rosen
Hungate alleged that Deutsche Bank and Rosen committed
unfair or deceptive acts or practices, in violation of HRS
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§ 480-2,20 by providing less than the statutorily required four
weeks of notice and failing to publish the notice of sale. HRS
§ 480-2(a) provides that “unfair or deceptive acts or practices
in the conduct of any trade or commerce are unlawful.”
HRS § 480-2 contains “broad language in order to
constitute a flexible tool to stop and prevent fraudulent,
unfair or deceptive business practices for the protection of
both consumers and honest business[persons].” Haw. Cmty. Fed.
Credit Union v. Keka, 94 Hawai?i 213, 228, 11 P.3d 1, 16 (2000)
(quoting Ai v. Frank Huff Agency, Ltd., 61 Haw. 607, 616, 607
P.2d 1304, 1311 (1980), overruled on other grounds by Robert’s
Haw. Sch. Bus, Inc. v. Laupahoehoe Transp. Co., 91 Hawai?i 224,
247, 982 P.2d 853, 876 (1999)). “HRS chapter 480’s paramount
purpose was to ‘encourage those who have been victimized by
persons engaging in unfair or deceptive acts or practices to
prosecute their claim’ thereby affording ‘an additional
deterrent to those who would practice unfair and deceptive
business acts.’” Zanakis-Pico v. Cutter Dodge, Inc., 98 Hawai?i
309, 317, 47 P.3d 1222, 1230 (2002) (citations omitted). This
statute “is remedial in nature and must be liberally construed
in order to accomplish the purpose for which it was enacted.”
Keka, 94 Hawai?i at 229, 11 P.3d at 17; see also Compton v.
20
Hungate also alleged an unfair methods of competition claim in
his complaint and first amended complaint, but does not dispute the circuit
court’s dismissal of that claim in his appeal.
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Countrywide Fin. Corp., 761 F.3d 1046, 1052 (9th Cir.
2014)(applying Hawai?i law).
To assert an unfair or deceptive acts or practices
claim pursuant to HRS § 480-2, Hungate must qualify as a
“consumer” and the alleged conduct of Rosen and Deutsche Bank
must involve “trade or commerce.” We address separately
Hungate’s claims against Deutsche Bank and Rosen for unfair and
deceptive acts or practices.
1. Hungate Sufficiently Alleged Deutsche Bank Violated
HRS § 480-2 by Engaging in Unfair or Deceptive Acts
or Practices
As a mortgagor who purchased residential property,
Hungate alleges he qualifies as a consumer under HRS chapter
480. A consumer is a “natural person who, primarily for
personal, family, or household purposes, purchases, attempts to
purchase, or is solicited to purchase goods or services or who
commits money, property, or services in a personal investment.”
HRS § 480-1 (2008). “[I]n the context of consumer debt, the
determination of whether the individual seeking suit is a
‘consumer’ should rest on whether the underlying transaction
which gave rise to the obligation” met the requirements of HRS
§ 480-1. Flores v. Rawlings Co., LLC, 117 Hawai?i 153, 164, 177
P.3d 341, 352 (2008). Here, the underlying transaction involved
committing money in a personal investment pursuant to HRS § 480-
1, namely, purchasing residential property. See Keka, 94
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Hawai?i at 227, 11 P.3d at 15 (citing Cieri v. Leticia Query
Realty, Inc., 80 Hawai?i 54, 69, 905 P.2d 29, 44
(1995))(explaining “real estate or residences qualify as
‘personal investments’”). Further, we have held that an
individual who purchases residential property through acquiring
a loan, i.e., a “loan borrower,” is a “consumer” committing
money in a personal investment within the meaning of HRS § 480-
1. Keka, 94 Hawai?i at 227, 11 P.3d at 15 (citing Cieri, 80
Hawai?i at 69, 905 P.2d at 44). Hungate, as a loan borrower who
purchased residential property, is thus a consumer.
We also conclude Deutsche Bank’s acts occurred in
trade or commerce. Trade or commerce means a “business
context.” Cieri, 80 Hawai?i at 65, 905 P.2d at 40.
Transactions conducted in a business context, “by their very
nature, include transactions conducted by a financial
institution,” such as a “loan extended by a financial
institution[.]” Keka, 94 Hawai?i at 227, 11 P.3d at 15. Thus,
the nature of a non-judicial foreclosure, which results from a
loan transaction, is that of a transaction conducted in the
business context. It is undisputed that Deutsche Bank is a
financial institution regularly engaged in providing loans and
conducting foreclosures. Deutsche Bank’s acts throughout the
foreclosure proceedings therefore occurred in the business
context.
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We next consider whether Hungate alleged sufficient
facts that Deutsche Bank engaged in unfair or deceptive acts.21
“The question of whether a practice constitutes an unfair or
deceptive trade practice is ordinarily a question of fact.”
Balthazar v. Verizon Haw., Inc., 109 Hawai?i 69, 72 n.4, 123
P.3d 194, 197 n.4 (2005) (citation omitted). To determine
sufficiency, we accept the allegations made in Hungate’s
complaints as true and “view them in the light most favorable
to” Hungate. Cayetano, 111 Hawai?i at 476, 143 P.3d at 15.
“[D]ismissal is proper only if it ‘appears beyond doubt that the
plaintiff[s] can prove no set of facts in support of [their]
claim[s] that would entitle [them] to relief.’” Id. (citation
omitted).
A practice “is unfair when it [1] offends established
public policy and [2] when the practice is immoral, unethical,
oppressive, unscrupulous or [3] substantially injurious to
consumers.” Keka, 94 Hawai?i at 228, 11 P.3d at 16 (citation
omitted). Hungate need not allege that Deutsche Bank’s actions
21
The circuit court did not reach the merits of Hungate’s unfair or
deceptive acts or practices claim in its dismissals of the initial complaint
and the first amended complaint. In its dismissal of the initial complaint,
the circuit court found that Hungate did not have standing to assert an
unfair or deceptive acts or practices claim against Rosen, and thus did not
reach the merits of Hungate’s claim. In dismissing the first amended
complaint against Deutsche Bank, the court explained that Hungate’s unfair or
deceptive acts or practices claim was based in part on his allegation that
Deutsche Bank failed to comply with the four-week requirement and failed to
publish notice of the postponements of the foreclosure sale. The court
determined that Hungate did not state a claim as to these issues and did not
further address Hungate’s unfair or deceptive acts or practices claim.
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meet all three of these factors to assert an unfair act or
practice. See id. at 229, 11 P.3d at 17 (determining that the
conduct in question was “unethical, oppressive, unscrupulous and
substantially injurious to consumers,” but not addressing
whether the conduct offended public policy); Kapunakea Partners
v. Equilon Enters. LLC, 679 F. Supp. 2d 1203, 1210 (D. Haw.
2009)(analogizing the three factors as applied to federal
antitrust laws to application of HRS § 480-2 to determine “[a]
practice may be unfair because of the degree to which it meets
one of the criteria or because to a lesser extent it meets all
three” (citation omitted)).
A practice may be unfair if it “offends public policy
as it has been established by statutes, the common law, or
otherwise[.]” Kapunakea Partners, 679 F. Supp. 2d at 1210
(citing FTC v. Sperry & Hutchinson, 405 U.S. 233, 244 n.5
(1972)). Hungate claims Deutsche Bank’s conduct offended public
policy because Rosen’s actions, on behalf of Deutsche Bank,
violated HRS § 667 Part I, as discussed supra. Deutsche Bank
also bore a common law duty to “use all fair and reasonable
means in obtaining the best prices for the property on sale[.]”
Kondaur, 136 Hawai?i at 235, 361 P.3d at 462 (citing Ulrich, 35
Haw. at 168); see also U.S. Bank Nat’l Ass’n v. Castro, 131
Hawai?i 28, 39, 313 P.3d 717, 728 (2013)(recognizing that a
purpose of non-judicial foreclosure statutes is to “protect the
37
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debtor from a wrongful loss of property” (citation omitted));
Hoge v. Kane, 4 Haw. App. 533, 540, 670 P.2d 36, 40 (1983)
(discouraging any action that “prevents a free, fair, and open
[judicial foreclosure] sale or [that] chills the sale”). A
factfinder could determine Deutsche Bank’s conduct offended
public policy or otherwise met the test for “unfair,” and
therefore Hungate sufficiently alleged that Deutsche Bank
engaged in unfair acts or practices.
Hungate also alleged that Deutsche Bank conducted the
non-judicial foreclosure deceptively. A deceptive act or
practice is “(1) a representation, omission, or practice[] that
(2) is likely to mislead consumers acting reasonably under the
circumstances [where] (3)[] the representation, omission, or
practice is material.” Courbat v. Dahana Ranch, Inc., 111
Hawai?i 254, 262, 141 P.3d 427, 435 (2006) (citation omitted).
A representation, omission, or practice is material if it
“involves ‘information that is important to consumers and,
hence, likely to affect their choice of, or conduct regarding, a
product.’” Id. (citation omitted). The test to determine
deceptiveness “is an objective one, turning on whether the act
or omission ‘is likely to mislead consumers,’ . . . as to
information ‘important to consumers’ . . . in making a decision
regarding the product or service.” Id. (citations omitted).
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“[P]roof of actual deception is unnecessary.” Rosa v. Johnston,
3 Haw. App. 420, 427, 651 P.2d 1228, 1234 (1982).
The same conduct that Hungate alleges to be unfair may
also be considered to be deceptive. Hungate contends Rosen’s
practice, on behalf of Deutsche Bank, of conducting foreclosure
sales on the 28th rather than 29th day from the date of first
publication and failing to publish postponements of the sale
date was likely to mislead reasonable consumers and could reduce
buyer interest. Such practices could render potential buyers
less able to determine whether the property was available for
sale and less able to obtain important information regarding the
property. As the United States Court of Appeals for the Ninth
Circuit explained, “[p]roper notice of the actual date of a
foreclosure auction is essential to ensure that foreclosed
properties bring adequate prices and that the public has an
appropriate opportunity to bid.” Kekauoha-Alisa v. Ameriquest
Mortg. Co. (In re Kekauoha-Alisa), 674 F.3d 1083, 1091 (9th Cir.
2012). Although Kekauoha-Alisa presented a stronger case in
which no public announcement of the sale was provided at all,
the failure to publish the postponement of a foreclosure sale
could mislead consumers. Thus, a factfinder could determine
Rosen’s scheduling of a foreclosure sale too early and failure
to publish postponement notices, while acting on Deutsche Bank’s
behalf, were deceptive acts.
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In addition to adequately alleging sufficient facts
that Deutsche Bank’s conduct were unfair or deceptive pursuant
to HRS § 480-2, Hungate was also required to allege sufficient
facts to show he was injured. See HRS § 480-13. “[T]he mere
existence of a violation is not sufficient ipso facto to support
the action; forbidden acts cannot be relevant unless they cause
private damage.” Ai, 61 Haw. at 618, 607 P.2d at 1312
(overruled on other ground by Robert’s, 91 Hawai?i at 247, 982
P.2d at 876). HRS chapter 480 does not define injury or
damages, but “Hawai?i courts have not set a high bar for
proving” injury. Compton, 761 F.3d at 1053. Hungate need only
allege that “he has, as a ‘direct and proximate result’ of
[Deutsche Bank’s] violation [of section 480-2], ‘sustained
special and general damages’ . . . to withstand a motion to
dismiss.” Id. at 1054 (citations omitted). Based on the
allegations in the complaints, the factfinder could determine
Hungate was injured by the foreclosure sale, which eliminated
equity that Hungate held in the property and prevented him from
using the property.
Accordingly, we hold that Hungate sufficiently alleged
claims of unfair and deceptive acts or practices under HRS
§ 480-2 against Deutsche Bank, and the circuit court erred in
dismissing Hungate’s unfair or deceptive acts or practices claim
against Deutsche Bank.
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2. Under the Circumstances, Hungate Cannot Claim Unfair
or Deceptive Acts or Practices by Rosen
Hungate also argues that he has standing as a consumer
to assert an unfair or deceptive acts or practices claim against
Rosen. Rosen maintains that the circuit court properly
dismissed Hungate’s unfair or deceptive acts or practices claim
because Hungate was not a consumer of Rosen’s services. We
rejected a similar contention in Flores. In Flores, the
plaintiffs brought an unfair or deceptive acts or practices
claim against a collection agency that provided subrogation and
claims recovery services to the Hawai?i Medical Services
Association (HMSA) based on actions conducted in regards to a
loan agreement between plaintiffs and HMSA. Flores, 117 Hawai?i
at 155-57, 177 P.3d at 343-45. Citing the statute’s definition
of “consumer,” the collection agency argued that the plaintiffs
were not consumers because the plaintiffs did not purchase,
attempt to purchase, or solicit to purchase goods or services
from the agency. Id. at 163, 177 P.3d at 351; see HRS 480-1.
We disagreed with the agency’s argument, and held that “the
statutory structure of HRS chapter 480 does not require that one
be a ‘consumer’ of the defendant’s goods or services, but merely
a ‘consumer.’” Id. at 164, 177 P.3d at 352. A plaintiff
“establishes his standing as a consumer in terms of his
relationship to a transaction, not by a contractual relationship
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with the defendant.” Id. Therefore, the “only requirement” is
that the consumer’s commitment of money, property, or services
in a personal investment forms the basis of his complaint. Id.
at 164-65, 177 P.3d at 352-53. As Hungate asserts, he is a
consumer based on the mortgage with Deutsche Bank, and is thus
also a “consumer vis-à-vis the mortgagee’s lawyer for the same
transaction.”
Additionally, Hungate argues that Rosen acted as an
agent for Deutsche Bank in conducting the foreclosure, and thus
should be similarly held liable under the UDAP statute. Hungate
cites Cieri v. Leticia Query Realty, Inc., 80 Hawai?i 54, 65,
905 P.2d 29, 40 (1995), to show that an agent or broker in a
real estate transaction can be sued for UDAP under HRS § 480-2.
However, the unique nature of the attorney-client relationship
warrants distinguishing the role of broker and attorney for
purposes of this case. Sellers and purchasers of real estate
often “utilize and rely on brokers for their expertise and
resources, including access to data in locating properties as
well as determining pricing of ‘comparables’ as a basis for
negotiations.” Cieri, 80 Hawai?i at 65, 905 P.2d at 40. Hence,
the role of a broker is to provide clients with expertise and
resources in real estate transactions.
In contrast, the role of an attorney involves
representing a client’s interests against those of an opposing
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party within an adversary system. Attorneys bear a duty to
zealously represent clients “within the bounds of the law.”
Giuliani v. Chuck, 1 Haw. App. 379, 384, 620 P.2d 733, 737
(1980); see also Hawai?i Rules of Professional Conduct,
“Preamble,” ¶ 2; ¶ 8; ¶ 9.22 In other settings, we have declined
to recognize a duty in favor of a plaintiff adversely affected
by an attorney’s performance of legal services on behalf of the
opposing party. In Boning, we noted that “creation of a duty in
favor of an adversary of the attorney’s client would create an
unacceptable conflict of interest. Not only would the
adversary’s interests interfere with the client’s interests, the
attorney’s justifiable concern with being sued for negligence
would detrimentally interfere with the attorney-client
relationship.” Boning, 114 Hawai?i at 220, 159 P.3d at 832.
Permitting a party to sue his or her opponent’s
attorney for UDAP under HRS § 480-2 in foreclosure actions
presents a similar issue in that an attorney’s concern with
being sued by a party opponent could compromise his or her
representation of the client. In a UDAP action, an attorney
would be especially vulnerable to suit because, for example,
under HRS § 480-2 “actual deception need not be shown; the
22
Our desire to avoid creating unacceptable conflicts of interest
in this context, to protect attorney-client counsel and advice from the
intrusion of competing concerns, and to allow adequate room for zealous
advocacy, does not encompass, for example, allowing attorneys to conduct
patently illegal activities on behalf of clients.
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capacity to deceive is sufficient.” Keka, 94 Hawai?i at 228, 11
P.3d at 16 (emphasis added) (citations omitted). Accordingly, a
plaintiff would need only to allege that opposing counsel has
breached the statutory duty under HRS § 480-2 “not to engage in
unfair or deceptive acts or practices in the conduct of any
trade or commerce . . . in a way that caused private damages[]
in order to state a claim under” HRS chapter 480. Compton, 761
F.3d at 1056. Given that UDAP lacks a more rigorous or precise
state of mind requirement, “even a carefully rendered opinion
could, if incorrect, have the capacity to deceive.” Short, 691
P.2d at 172 (Pearson, J., concurring). The attorney would
therefore “have to insure the correctness of his [or her]
opinions and strategies,” rendering it “virtually impossible for
an attorney to effectively perform the traditional role of legal
counselor.” Id. Similar to the negligence issue in Boning, in
foreclosure actions an attorney’s justifiable concern with being
sued by the opposing party for UDAP could compromise the
attorney’s ability to zealously represent his or her client.
Consequently, based on the allegations against Rosen, we decline
to recognize a UDAP claim against him by Hungate under HRS §
480-2 in the instant foreclosure action.23
23
We do not now decide whether the 2012 amendments to the
foreclosure statute create potential UDAP liability under some circumstances
for attorneys conducting nonjudicial foreclosures. See HRS § 667-60
(2016)(imposing UDAP liability on “any foreclosing mortgagee” for violating a
(continued . . .)
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Accordingly, the circuit court properly dismissed
Hungate’s complaint alleging Rosen violated HRS § 480-2 by
engaging in unfair or deceptive acts or practices.
IV. Conclusion
For the foregoing reasons, we vacate in part the
circuit court’s November 5, 2013 order granting Rosen’s motion
to dismiss, and vacate in part the circuit court’s April 8, 2014
order granting Deutsche Bank’s motion to dismiss, and remand to
the circuit court for proceedings consistent herewith.
James J. Bickerton, /s/ Mark E. Recktenwald
John Francis
Perkin, Stanley K. /s/ Paula A. Nakayama
Roehrig
for appellant /s/ Sabrina S. McKenna
Christopher T. /s/ Richard W. Pollack
Goodin, David B.
Rosen, Peter W. /s/ Michael D. Wilson
Olsen
for appellee Rosen
Judy A. Tanaka
for appellee
Deutsche Bank
(. . . continued)
series of provisions governing nonjudicial foreclosure); HRS § 667-1
(2016)(defining “mortgagee” to include “the current mortgagee’s or lender’s
duly authorized agent”).
45
