Daily Archives: April 17, 2017

State Supreme Court hits some bank foreclosures

A post here last week discussed a recent federal court opinion that concluded condominium associations were not allowed under Hawaii law to pursue nonjudicial foreclosures against individual owners who failed to pay their regular maintenance fees.

But there was another recent foreclosure-related decision that could have much more of an impact.

In the case of Hungate v. Rosen, the Hawaii Supreme Court ruled that a bank conducting a nonjudicial foreclosure must publish a new public notice each time it postpones a scheduled foreclosure sale.

Apparently it was a common practice for banks to pursue nonjudicial foreclosures under the “power of sale” provisions in their mortgages, publish a notice of the planned sale, and then postpone it at the last minute. A new date would be set but not announced. Sometimes this would be repeated a number of times, and when the sale was finally held, the bank would be the only bidder present.

The Hawaii Supreme Court said that while the common language of these mortgages was ambiguous, the court was required to rule against the bank’s position.

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[.]”

The original circuit court decision had dismissed claims against the bank, but the Supreme Court reinstated key claims, ruling that the bank should have announced any postponements and the new dates of planned foreclosure sales. And the court also ruled that the lower court should have allowed claims of unfair or deceptive trade practices to go forward. The case was remanded to circuit court for proceedings consistent with the ruling.

I was told that there could be thousands of nonjudicial foreclosures brought by banks that had the same defective notices.

There’s obviously a lot going on in the legal world.

Time to sort out just how all of the cases reconsidering previous nonjudicial foreclosures are going to affect the real estate market, title insurers, banks, lawyers, and those property owners who were foreclosed on.

Like the cases involving condominium associations, this isn’t likely to be pretty.