Category Archives: Legislature

Disagreement remains over nonjudicial foreclosures by condo associations

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When Senate Bill 551 CD1 became law on July 12 as Act 282 without Governor Ige’s signature, there appeared to be hope that the legality of condominium associations’ use of nonjudicial foreclosure procedures had been settled.

But the issues will be considered again in a case scheduled for oral arguments before the Hawaii Supreme Court on September 19, which will test whether or not the new law retroactively legalizes all prior condominium foreclosures, or only those of those conducted in accordance with alternative procedures for condominiums adopted into law in 2012.

I’ve been following the condominium foreclosure issues for years, beginning when I served on the board of a condominium association trying to steer its own legal approach. The issues are complex, and I hope that my explanations below don’t cut too many corners in an effort to make it somewhat understandable.

The case before the court is a challenge brought by Gilbert and Daisy Malabe to the legality of the nonjudicial foreclosure brought by the condominium association of the Executive Centre condominium in downtown Honolulu.

The Malabe lawsuit was one of several that attacked nonjudicial foreclosures brought by condominium associations prior to the 2012 rewrite of the law. Those foreclosures utilized what was known as Part 1 of the foreclosure law, which allows mortgage holders to pursue foreclosure without court supervision if their mortgages contain an explicit provision authorizing the “power of sale” in the event of defaults.

Over several years prior to 2012, a handful of law firms took the position that condominiums could also utilize this part of the law to streamline their foreclosure actions, thereby making the procedure less costly. These law firms sold their legal theory and legal services to cash-strapped condominium associations, although other lawyers specializing in condominium law were advising that the strategy was risky at best.

The 2012 amendments to the law created a specific procedure for condominiums to follow when pursuing nonjudicial foreclosures which provided additional safeguards for apartment owners in financial distress, and it was presumed that foreclosure actions filed under that new law would be legal and avoid the legal challenges aimed at Part 1 foreclosures.

However, the Intermediate Court of Appeals, in its 2018 decision in the case of Sakal v. Assn of Apartment Owners of Hawaiian Monarch, held that even those foreclosure actions under the new 2012 law would be legal only if the condominium’s declaration and by-laws contained explicitly provided for the power of sale.

Act 282 (2019) was the legislature’s attempt to overturn the Sakal decision by giving all condominiums the power of sale as a matter of law.

Now in the Malabe’s appeal, the Supreme Court has specifically asked attorneys for the two sides to file legal briefs regarding the impact of the new law on this case.

Here’s the case summary from the Supreme Court’s website.

No. SCWC-17-0000145, Thursday, September 19, 2019, 8:45 a.m..

GILBERT V. MALABE and DAISY D. MALABE, Respondents/Plaintiffs-Appellants, vs. ASSOCIATION OF APARTMENT OWNERS OF EXECUTIVE CENTRE, by and through its Board of Directors, Petitioner/Defendant-Appellee.

The above-captioned case has been set for argument on the merits at:

Supreme Court Courtroom
Ali`iolani Hale, 2nd Floor
417 South King Street
Honolulu, HI 96813

Attorneys for petitioner:

David R. Major, Jai W. Keep-Barnes, and James G. Diehl of Bays Lung Rose & Holma

Attorneys for respondent:

Steven K. S. Chung, Michael L. Iosua, Timothy E. Ho and Li Li of Imanaka Asato, LLLC

NOTE: Order accepting Application for Writ of Certiorari, filed 05/23/19.

COURT: Recktenwald, C.J., Nakayama, McKenna, Pollack, and Wilson, JJ.

Brief Description:

On December 13, 2016, Respondents/Plaintiffs-Appellants Gilbert V. Malabe and Daisy D. Malabe (collectively, “Malabes”) filed a Complaint in the Circuit Court of the First Circuit (“circuit court”) against Petitioner/Defendant-Appellee Association of Apartment Owners of Executive Centre, by and through Its Board of Directors (“AOAO”). The Complaint asserted claims for wrongful foreclosure and unfair or deceptive acts or practices (“UDAP”) based on the AOAO’s nonjudicial foreclosure and December 17, 2010 public sale of the Malabes’ apartment due to unpaid assessment fees, which were purportedly conducted pursuant to Hawai i Revised Statutes (“HRS”) § 514B-146 (Supp. 2010) and HRS § 667-5 (Supp. 2010). On February 17, 2017, the circuit court filed an order granting the AOAO’s motion to dismiss the Complaint and entered final judgment.

The Malabes timely appealed to the ICA. In relevant part, the ICA concluded that for reasons explained in Sakal v. Association of Apartment Owners of Hawaiian Monarch, 143 Hawai i 219, 426 P.3d 443 (App. 2018), cert denied, SCWC-15-529, 2018 WL 6818901 (Dec. 28, 2018), the circuit court erred in granting the AOAO’s motion to dismiss Count I, the wrongful foreclosure claim, as the AOAO lacked a power of sale and none was granted by statute. See Malabe v. Ass’n of Apartment Owners of Executive Ctr., CAAP-17-145, at 7 (App. Nov. 29, 2018) (SDO).

On appeal, the AOAO asserts the ICA erred in vacating the circuit court’s judgment with respect to Count I, the wrongful foreclosure claim, primarily arguing that the ICA erred in its statutory analysis and its application of the law to the AOAO, which is a nonprofit. Moreover, the AOAO suggests that SB551, CD1 of 2019, A Bill for an Act Relating to Condominiums, should be considered in any statutory analysis.

As to the sixth question presented regarding SB551, CD1 of 2019, A Bill for an Act Relating to Condominiums, which became law on July 12, 2019, the parties were ordered on July 16, 2019 to file supplemental briefs addressing the following issue:

What effect, if any, does SB551, CD1 of 2019 have on this case?

See:
Supplemental Briefs Re: The Effect of SB 551, CD1 of 2019 on this case.

Plaintiffs supplemental brief

Defendant’s supplemental brief

Also see:

“Court deals major setback to condominium associations, attorneys,” ilind.net, Sept 26, 2018.

“Ian Lind: Why Condo Associations Are Sweating After A Judge’s Ruling,” Civil Beat, April 12, 2017.

“Ian Lind: Wrongful Foreclosure Claims Rock The Condo World,” Civil Beat, August 31, 2016.

Legislature’s website adds some useful links

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An email this week from the folks at the state Capitol’s Public Access Room called pointed out several useful updates to the legislature’s website (www.capitol.hawaii.gov).

You’ll find there are 3 additional buttons in the center screen – one to access hearings, another for Orders of the Day, and the last to access the broadcast schedule and archived videos.

The “Keywords” search box is now labeled “Bills/Committee Reports” but has the same functionality as before – it will search through current bills, resolutions, and committee reports for the term you enter. It’s the second search box on the left of the homepage. (Tips on searching appear at the top of the column.)

A “Session Laws” (Session Laws of Hawaii, or SLH) search box has been added that allows you to search all Acts dating back to 1959. You may click on “Browse SLH Sections by Year” to choose a particular year or to use the SLH index for that year. (This new feature has helped us out several times already!)

We’ve updated the Public Access Room’s website guide to reflect the changes.

If you’re not familiar with the website, it’s worth your while to do some exploring to find out the range of useful information buried there.

Dem Party activist reacts to defeat of bill to raise minimum wage

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Longtime Democratic Party activist Bart Dame is an experienced and knowledgeable observer of the legislature and its dynamics.

Following the overwhelmingly Democratic legislature’s defeat of a bill to raise the state’s minimum wage, despite the party’s strong support for such a measure, Dame told the Honolulu Star-Advertiser:

“It looks like the legislative leadership of both chambers is just out of touch with the real conditions facing working people in Hawaii, who are struggling to pay basic expenses,” he said. “They’re just so out of touch with the actual conditions faced by working people that they can play games and kill a bill like this when there’s no good reason for doing it.”

In a Facebook comment, he added a more detailed assessment of the potential for moving forward politically from here.

Here’s a lengthy excerpt, reprinted with his permission from a longer Facebook comment.

Given the current composition of the legislature, given the limited number of activists working to raise the minimum wage, given the level of organized public support (and resistance from the business owners) the drive to raise the minimum wage this year failed. So how do we create new circumstances which increase the chances of raising the MW next year?

Both the Senate and the House are controlled by lawmakers who have found it is much more important to have good, mutually supportive relationships with business owners and their lobbyists, who are well-organized, with a lot of resources, than with the poorly-organized, under-resourced “do-gooder” activist types, who are either volunteers (and amateurs) or who hold low paying jobs with public interest nonprofits.

“Community” or party-based activists can rarely arise above the level of being a nuisance, presuming a right to make demands on lawmakers.

So how do we set about to “create facts on the ground” that will increase our chances of greater success next year? Next year is an election year, a time when our ability to be a “nuisance” that affects those elections
Increases, if only slightly.

The internal dynamics in both chambers could become more supportive with the election of a few more Democrats who actually hold “Democratic” beliefs, values. In the Senate, recent votes show the factional alignment of votes, and with them, “leadership” is pretty shaky. Leadership in both chambers tried to push through an approach to AirBnB (and Expedia) that pretty much surrenders to the power of the market, legal or illegal, only asking for payoffs in the form of taxes. The “Leadership and Lobbyist Alliance” prevailed easily in the House, but failed in a 12-12 floor vote last night in the Senate. (It would have been 13-12 against, but one Senator was absent).

The attempt by the “Leadership and Lobbyist Alliance” to pass the A&B “Water Theft Bill” also passed easily in the House, But has stalled out (so far) in the Senate (with a slightly different alignment of senators). Another sign the Senate leadership’s control is shaky.

The “facts on the ground” in the Senate appear to be more conducive to change. The “facts on the ground” in the House are much less so. The current leadership has a much more stable control, which leads me to adopt a view that we need to change the “Gestalt” within the Democratic Caucus in the House. To not aspire to replacing the leadership but to strengthening the influence of progressives within the caucus with an assumption the leadership’s policies would shift to reflect that more progressive composition. Some incumbents need to be knocked off and replaced with Democrats who actually uphold “Democratic” values more than a cynical, amoral “professionalism.”

Progressive efforts have started with HAPA’s Kuleana Academy. But need to step up and to become a bit more realistic in what it takes to build a movement AND to recruit and produce electable candidates.

Where is the 2019 report of the Commission on Salaries?

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There was a flurry of news and commentary a week ago when the current Commission on Salaries made its recommendations for pay increases for legislators, judges, and state officials.

“Big Pay Raises Coming For Lawmakers And Top State Execs” was the first story that appeared in Civil Beat. Later, CB reporter Chad Blair wondered, “Are Hawaii legislators paid too much?”

Hawaii News Now joined Civil Beat in publishing several pages containing tables with the salary recommendations.

So here’s my question: Where is the report of the Commission on Salaries?

Each of the two prior commissions issued reports that presented the reasoning behind their salary recommendations. You can find their reports online: One was presented to the Legislature in 2013, while the prior commission reported in 2007.

The Department of Human Resources Development website includes a link to the Commission on Salaries, which in turn has links to meeting notices and minutes of the current commission. According to the minutes, the commission’s final report was approved and signed on March 13.

By law, it is supposed to be transmitted to the legislature via the governor.

The capitol website maintains a list of Reports Submitted to the Legislature. The salary commission report isn’t there. Then I checked Governor’s Messages, often used to convey documents from the governor to the legislature. It’s not there either.

So when will the commission’s 2019 report become available to the public? It’s hard to evaluate whether the proposals are reasonable or not without access to the commission’s reasoning and supporting documents such as those contained in prior reports.

Just wondering.