Kekauoha-Alisa v. Ameriquest Mortgage Co. (In re Kekauoha-Alisa)

Summarized by Dean Rallis , Hahn & Hahn, LLP
13 years 11 months ago

Citation:

No. 09-60019/BAP No. HI-08-1166-JuPaD (for publication)

Tag(s):

Ruling:

The Ninth Circuit held that the lender's failure to publicly announce the postponement of a non-judicial foreclosure sale violated Hawaii’s non-judicial foreclosure statute and constituted a deceptive practice under state law. The Ninth Circuit also concurred in the Bankruptcy Court's remedy of voiding the foreclosure sale. However, the Ninth Circuit disagreed with the Bankruptcy Court in calculating (i) attorneys' fees without considering evidence of the lender's settlement offer (however agreeing with the Bankruptcy Court that such fee award is limited by state law to 25 percent of the damages), and (ii) damages, without finding that such damages were caused by the deceptive practice. The case was remanded to the Bankruptcy Court for proper calculation of attorneys' fees and damages.

Procedural context:

After a 5-day bench trial, the Bankruptcy Court ruled in favor of the debtor and against the lender for the lender's failure to publicly announce the postponement of the foreclosure sale, which violated applicable Hawaii law. The Bankruptcy Court voided the foreclosure sale and awarded damages of $417,761.66 and attorneys' fees (as the prevailing party) of $38,945.01. The lender appealed the Court's ruling on liability and calculation of damages, and the debtor cross-appealed on the Court's ruling that attorneys' fees are limited to 25 percent of damages. The BAP reversed the Bankruptcy Court, ruling that the lender satisfied the public announcement requirements and, thus, did not violate Hawaii's non-judicial foreclosure laws and did not constitute an unfair and deceptive practice under Hawaii law. The debtor appealed to the Ninth Circuit, which reversed the BAP's ruling on liability and remanded the case to the Bankruptcy Court for the calculation of damages and attorneys' fees consistent with the Ninth Circuit's ruling.

Facts:

The debtor defaulted on her loan eight times, causing the lender to initiate non-judicial foreclosure proceedings. Prior to the initial date set for the sale, the debtor filed for relief under chapter 13. During the bankruptcy case, the lender properly announced the postponement of the sale on three separate occasions, the last sale date being September 23, 2005. The lender attempted to postpone the sale again (the fourth time). At the sale, the lender's counsel assigned a secretary to attend the sale on behalf of the lender and make the announcement of a further postponement of the sale to December 2, 2005. However, the secretary never made an announcement or posted information that the sale of the debtor's property was being postponed. Subsequently, the lender sought and was granted relief from the stay, and the foreclosure sale proceeded on December 2, 2005. The successful and only bid was the lender's credit bid. The debtor filed a complaint against the lender alleging that the sale violated Hawaii's non-judicial foreclosure laws, constituted an unfair and deceptive trade practice under state law and breached the terms of the loan documents. The Bankruptcy Court ruled in favor of the debtor finding that the lender's failure to make a public announcement of the postponement of the sale to December 2, 2005, violated Hawaii's non-judicial foreclosure laws, constituted a violation of Hawaii's unfair and deceptive trade practice law, and a breach of the loan agreement. As a remedy, the Bankruptcy Court voided the foreclosure sale and awarded monetary damages of $417,761.66 and attorneys' fees of $38,945.01. The Ninth Circuit concurred with the Bankruptcy Court's ruling on the lender's liability and the remedy of voiding the foreclosure sale. However, the Ninth Circuit found the Bankruptcy Court erred in awarding monetary damages without making a specific factual finding that the lender's actions caused the debtor damage. ("Any injury must be fairly traceable to the defendant's actions." Citations omitted.) Because the calculation of damages and causation are questions of fact, the Ninth Circuit remanded the calculation of damages to the Bankruptcy Court. In regard to the award of attorneys' fees, the Ninth Circuit determined that the Bankruptcy Court erred in not considering evidence of the lender's earlier settlement offer, which Federal Rule of Evidence Rule 408 does not preclude for purposes of calculating attorneys' fees. The Ninth Circuit did agree with the Bankruptcy Court that the attorney fee award on a breach of contract claim is limited, under state law, to 25 percent of damages (in this case, the value of the equity in the debtor's property). The Ninth Circuit remanded the proper calculation of attorneys' fees to the Bankruptcy Court.

Judge(s):

GOODWIN, TROTT AND MURGUIA, Circuit Judges

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