Based on
your review of the case study, do you agree with the Court’s decision?
In case you need a refresher, the case study follows:
In case you need a refresher, the case study follows:
In 2002,
Margery Kanamu-Kalehuanani Kekauoha-Alisa (Debtor) refinanced a mortgage on her
property on Hawaii Island and executed a promissory note to Ameriquest Mortgage
Company in the amount of $127,500. Debtor defaulted on her loan eight times,
causing Ameriquest to initiate foreclosure proceedings in early 2005. On April
6, 2005 Ameriquest assigned its interest in the mortgage to WM Specialty
Mortgage LLC, which later became JPMC Mortgage, the named party in this action.
The assignment notwithstanding, Ameriquest continued to service Debtor's
mortgage (hereafter, Ameriquest and JPMC Mortgage are referred to collectively
as "Lenders"). A foreclosure sale was scheduled for May 13, 2005.
On May 10,
2005, three days before the scheduled foreclosure sale, Debtor filed for
Chapter 13 bankruptcy, triggering an automatic stay of the sale. To comply with
the stay, a law firm employed by Lenders postponed the scheduled foreclosure
sale. HRS § 667-5[1] authorizes a foreclosure sale to be "postponed from
time to time by public announcement made by the mortgagee or by a person acting
on the mortgagee's behalf." The law firm properly announced the
postponement of the sale three times from May 13, 2005 until September 23,
2005.
On September
23, 2005, the law firm attempted to postpone the sale yet again, a fourth and
final time. The auction was scheduled to occur at noon at a flagpole located in
front of Hale Halewai, a local community center. The firm delegated the task to
a legal secretary who had never before postponed a foreclosure sale. The
secretary arrived ten or fifteen minutes before noon. Rather than shouting out
the postponement to all those present, the secretary asked several of the
people present if they were interested in Debtor's property. Everyone she spoke
to said they were not. She did not attempt to speak to those individuals who
appeared to be there for another auction that was occurring at the same time,
and she did not speak to everyone in the area. She did not tell those she spoke
with that the auction was postponed to December 2, 2005. The secretary stayed
at the flagpole until approximately 12:25 PM, after the other auction had
finished and the area was deserted. She left without ever announcing or posting
the information that the sale of Debtor's property had been postponed.
On November
1, 2005, Lenders moved for relief from the stay to allow them to proceed on the
foreclosure sale. On November 21, after Debtor failed to respond, the
bankruptcy court granted Lenders' motion. The foreclosure sale took place on
December 2. The successful—and only bid—was a credit bid made by the auctioneer
on behalf of Lenders. A quitclaim deed to the property was recorded on December
27, 2005. Lenders initiated an ejectment action in state court in January,
2006. Lenders obtained a judgment in their favor on April 11, 2006, which
Debtor appealed. That appeal is still pending in state court—apparently waiting
for our decision.
On April 26,
2006, Debtor filed a complaint in the bankruptcy court, alleging, inter alia,
that the sale had violated the automatic stay, breached the terms of the
mortgage contract, constituted an unfair and deceptive trade practice under HRS
§ 480-2, violated various requirements of nonjudicial foreclosure procedure
under HRS § 667-5, and constituted a fraudulent transfer under HRS § 651C-7.
The bankruptcy court dismissed on summary judgment Debtor's claims alleging a
violation of the stay and fraudulent transfer.
After a
five-day bench trial on the remaining claims, the bankruptcy court issued
amended findings of fact and conclusions of law. The court concluded that
Lenders' failure to publicly pronounce the postponement of the foreclosure sale
on September 23, 2005, violated the "public announcement" requirement
of HRS § 667-5 as well as the terms of the mortgage contract. Contrary to Debtor's assertion on
appeal, the court found only a single violation of HRS § 667-5. As a remedy,
the court voided the foreclosure sale. The court held that the improper
postponement was also a breach of the mortgage contract, because the contract
required that Lenders comply with state law in any foreclosure proceeding.
In addition,
the court ruled that the improper postponement was an unfair and deceptive
trade practice under HRS § 480-2. It awarded Debtor treble damages, under HRS §
480-13, for damages sustained as a result of the violation of § 480-2,
calculating the damages sustained as (1) Debtor's lost equity in her house, (2)
the rental value of the house for the time during which she lost possession of
it, and (3) the attorneys' fees Debtor expended defending against the state
court ejectment action. The total money judgment was $417,761.66.
Finally, the
court awarded Debtor additional attorneys' fees under two Hawaii statutes: HRS
§ 607-14, allowing fees for the prevailing party in contract claims, and HRS §
480-13(b)(1), allowing fees for the party establishing a violation of HRS §
480-2. The court allocated attorneys' fees equally between the contract claim
and the HRS § 480-2 claim.
You may return to the course after you complete your assignment.
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