American Savings Bank, F.S.B. v. Chan.

*** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
21-JAN-2020
11:13 AM

IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

---oOo---
________________________________________________________________

AMERICAN SAVINGS BANK, F.S.B., a federal savings bank,
Respondent/Plaintiff-Appellee,

vs.

JOHNNY KINMAN CHAN; JEAN TOSHIKO CHAN; DIRECTOR OF TAXATION,
STATE OF HAWAIʻI; CAPITAL ONE BANK (USA) N.A.; HAWAIʻI HOUSING
FINANCE AND DEVELOPMENT CORPORATION, a Public Body and Corporate
Politic, Respondents/Defendants-Appellees,

and

VILALGES OF KAPOLEI ASSOCIATION (incorrectly identified in the
caption as ASSOCATION OF APARTMENT OWNERS OF THE VILALGES OF
KAPOLEI), Petitioner/Defendant-Appellant.

(SCWC-XX-XXXXXXX; CAAP-XX-XXXXXXX; CIVIL NO. 13-1-0944)
______________________________________________________________

VILLAGES OF KAPOLEI ASSOCIATION, a Hawaiʻi non-profit
corporation, Petitioner/Plaintiff-Appellant,

vs.

JOHNNY KINMAN CHAN, JEAN TOSHIKO CHAN; FIRST BANK NATIONAL
ASSOCIATION; DEPARTMENT OF TAXATION, STATE OF HAWAIʻI; CAPITAL
ONE BANK (USA) N.A.; HAWAIʻI HOUSING FINANCE AND DEVELOPMENT
CORPORATION, a Public Body and Body Corporate and Politic,
Respondents/Defendants-Cross-Claim Defendants-Appellees,

and
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

AMERICAN SAVINGS BANK, F.S.B., a federal savings bank,
Respondent/Defendant-Cross-Claimant-Appellee.

(SCWC-XX-XXXXXXX; CAAP-XX-XXXXXXX; CIVIL NO. 12-1-2466)
______________________________________________________________

SCWC-XX-XXXXXXX

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS

JANUARY 21, 2020

RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

OPINION OF THE COURT BY McKENNA, J.

I. Introduction

This certiorari proceeding arises from two cases filed and

consolidated in the Circuit Court of the First Circuit (“circuit

court”) concerning a foreclosure dispute between the Villages of

Kapolei Association (“Association”), the Hawaiʻi Housing Finance

and Development Corporation (“HHFDC”), Johnny Kinman Chan and

Jean Toshiko Chan (“Chans”), and American Savings Bank, F.S.B.

(“ASB”). The dispute concerns the circuit court’s determination

of lien priority between the Association’s and HHFDC’s competing

liens and the valuation of HHFDC’s senior lien. The underlying

foreclosure of ASB’s first mortgage lien is not in dispute.

The Association’s application for writ of certiorari

(“Application”) raises three issues. First, the Association

contends the Intermediate Court of Appeals (“ICA”) erred by

affirming the circuit court’s alleged retroactive application of

Hawaiʻi Revised Statutes (“HRS”) § 201H-47 (Supp. 2009) to rule

2
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

that HHFDC’s lien was senior and superior to the Association’s

liens. We hold that the ICA did not err because (1) whether the

circuit court actually applied HRS § 201H-47 was unclear; (2)

HHFDC had lien priority over the Association’s liens pursuant to

HRS § 201E-221 (repealed 1997), the statute in effect when the

deed and Shared Appreciation or Equity (“SAE”) Agreement between

the Chans and HHFDC’s predecessor-in-interest, the Housing

Finance and Development Corporation (“HFDC”) were entered; and

(3) HHFDC had lien priority over the Association pursuant to the

“first in time, first in right” principle and the SAE Agreement,

which was incorporated into the deed.

Second, the Association asserts the ICA erred by ignoring

the plain language of Sections 1, 2, 3, and 7 of the SAE

Agreement relating to the applicability of the agreement’s

appraisal process and whether the SAE Agreement became null and

void upon ASB’s foreclosure. We hold the ICA did not err in

determining the appraisal process applied and that ASB’s

foreclosure did not nullify the SAE Agreement.

Third, the Association argues the ICA erred by holding that

HHFDC had rights under the SAE Agreement because there were

genuine issues of material fact regarding HHFDC’s standing to

enforce the agreement. We hold that, as a matter of law, HHFDC

had standing to enforce the SAE Agreement as successor to HFDC

3
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

pursuant to Act 350 of 1997 and Act 196 of 2005. 1997 Haw.

Sess. Laws Act 350; 2005 Haw. Sess. Laws Act 196.

We therefore affirm the ICA’s August 20, 2019 judgment on

appeal.

II. Background

A. Factual Background

1. History of HHFDC

Act 337 of 1987 established HFDC to promote affordable

housing. 1987 Haw. Sess. Laws Act 337, § 15 (§-5) at 1049

(codified at HRS ch. 201E (repealed 1997)). Act 350 of 1997

combined HFDC with the Hawaiʻi Housing Authority and Rental

Housing Trust Fund to create the Housing and Community

Development Corporation of Hawaiʻi (“HCDCH”). 1997 Haw. Sess.

Laws Act 350, § 2 (§-2) at 1013 (codified at HRS ch. 201G

(repealed 2006)). Act 350 stated that HCDCH would “succeed to

all of the rights and powers previously exercised” by HFDC, and

that “[a]ll deeds, leases, contracts . . . or other documents

executed or entered into by or on behalf of [HFDC] . . . shall

remain in full force and effect.” Act 350, § 20 at 1091.

Act 196 of 2005 split HCDCH into the Hawaiʻi Public Housing

Administration and HHFDC. 2005 Haw. Sess. Laws Act 196, § 19 at

620 (codified at HRS ch. 201H (Supp. 2005)). Act 196

transferred “[a]ll rights, powers, functions, and duties of

[HCDCH]” relating to state housing and financing programs to

4
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

HHFDC. § 22 at 631. Act 196 also stated that “[a]ll deeds,

leases, contracts . . . or other documents executed or entered

into by or on behalf of [HCDCH] or [HFDC] . . . which are made

applicable to [HHFDC] by this Act, shall remain in full force

and effect.” § 25 at 632.

2. The Chans purchase the Villages of Kapolei property

On June 6, 1991, the Chans purchased a house (“Property”)

in the Villages of Kapolei, a planned affordable housing

community created by HFDC. The Chans purchased the Property

through HFDC’s SAE Program, which allowed participants to

purchase a home at a discounted price in exchange for an

agreement (“SAE Agreement”) granting HFDC a share of the

appreciation of the home’s equity (“Net Appreciation”) if the

property were ever sold or transferred.1

1
Section 1.F of the SAE Agreement defined “Net Appreciation” as:

Fair Market Value of the Property

minus Grantee’s Original Purchase Price

minus The amount obtained by multiplying the following
fraction:

Fair Market Value of the Property divided by Actual Sale
Price by the sum of the following sales and closing
expenses which the Grantee actually pays in the case of a
bona fide arm’s length sale (but not including a
foreclosure sale) of the Property: (i) escrow fees, (ii)
title report fees (not including any title insurance
premiums), (iii) drafting of conveyance documents, (iv)
conveyance taxes, (v) notary fees, (vi) recording fees and
(vii) real estate commissions. (The foregoing fraction
shall not exceed a value of “1”.)

(continued. . .)

5
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

Section 2 of the SAE Agreement outlined when HFDC would be

entitled to its share of the Net Appreciation value and how

HFDC’s share would be calculated:

Except for a “Permitted Transfer”, as that term is defined
below, the Grantee promises and agrees that if and when all
or any part of or interest in the Property is sold or
transferred or if the Grantee shall be divested of title or
any interest in the Property, in any manner, voluntarily or
involuntarily, including a judicial or nonjudicial
foreclosure sale, HFDC will immediately be entitled to a
share of the Net Appreciation equal to:

HFDC’s Percentage Share2 x Net Appreciation

The SAE Agreement was incorporated into the Chans’ deed,

which was recorded in Land Court on June 12, 1991.

The Chans financed their purchase of the Property through a

$111,896 loan secured by a June 6, 1991 mortgage to ASB.

Section 7 of the SAE Agreement, titled “First Mortgage

Protection,” granted ASB’s mortgage priority over HFDC’s liens

in the event of foreclosure. Section 7 also provided that “any

person who acquires legal title to the Property as a result of

foreclosure” would acquire title free of HFDC’s liens, and that

(. . .continued)
Section 1.E of the SAE Agreement defined “Fair Market Value” as “the
fair market value of the Property as determined by an appraisal obtained and
performed in the manner described below in Section 3. if and when the Grantee
subsequently sells or transfers the Property.”
Because this case involved a foreclosure sale, the “amount obtained by
multiplying the following fraction” was zero. (Fair Market Value / Actual
Sale Price x 0 = 0) Therefore, the Net Appreciation equaled the Fair Market
Value of the Property minus the Grantee’s Original Purchase Price.
2
Section 1.C of the SAE Agreement provided that HFDC’s Percentage Share
was 62% and was calculated by subtracting the Chans’ original purchase price
of the Property ($111,400) from the Property’s original fair market value
($296,400), then dividing the total by the original fair market value
($296,400) and rounding to the nearest percent.

6
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

the SAE Agreement would be “null and void upon a conveyance of

the Property through a foreclosure sale . . . .”

Upon signing the deed, the Chans also agreed to the

Association’s Declaration of Covenants, Conditions, and

Restrictions (“Covenants”). On November 14, 2006, the

Association recorded a $26,687.30 judgment lien against the

Property in Land Court for the Chans’ failure to adhere to

landscaping requirements in violation of the Covenants. On

September 5, 2012, the Association filed a $5,763.66 lien

against the Property in Land Court because the Chans failed to

pay for maintenance assessments in violation of the Covenants.

On December 3, 2012, ASB sent the Chans a notice of default

demanding payment on the mortgage.

B. Circuit Court Proceedings

On October 1, 2012, the Association filed a complaint for

foreclosure. On March 28, 2013, ASB filed a complaint for

foreclosure alleging the Chans had defaulted on the loan and

mortgage, and that the mortgage was the “valid first lien upon

the property . . . .” ASB’s complaint named the Association as

a defendant, and HHFDC was later identified and made a party

defendant.3

3
The Association and ASB’s complaints named the Chans as defendants.
The circuit court entered default against the Chans for failure to respond to
both complains. The Director of Taxation for the State of Hawaiʻi and Capital
(continued. . .)

7
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

On September 20, 2013, ASB filed a motion for summary

judgment. The parties stipulated to consolidate the ASB and the

Association foreclosure actions. The circuit court granted

ASB’s motion and entered a Hawaiʻi Rules of Civil Procedure

(“HRCP”) Rule 54(b) judgment on May 12, 2014.4

On April 22, 2014, HHFDC filed a motion for summary

judgment (“HHFDC’s motion for summary judgment”), arguing that

its lien was senior and superior to all other liens except ASB’s

under the “first in time, first in right” principle. HHFDC

asserted it had assumed HFDC’s rights under the deed by statute.

HHFDC contended that HRS § 201H-47(e)5 entitled HHRDC to its Net

Appreciation share when a foreclosure action is filed, and that

the SAE lien was a covenant running with the land under

HRS § 201H-47(a)(6). HHFDC asserted its Net Appreciation share

was $244,032, and it attached a copy of a November 2013

(. . .continued)
One Bank (USA), N.A. were also named as defendants. However, these
defendants are not actively involved in the current appeal.
4
The Honorable Judge Bert I. Ayabe presided.
5
HRS § 201H-47(e) (Supp. 2009) (amended 2018) read, in relevant part:

The restrictions prescribed in this section . . . shall be
automatically extinguished and shall not attach in
subsequent transfers of title when a mortgage holder or
other party becomes the owner of the real property pursuant
to a mortgage foreclosure, foreclosure under power of sale,
or conveyance in lieu of foreclosure after a foreclosure
action is commenced; provided that the mortgage is the
initial purchase money mortgage . . . . The corporation
shall be a party to any foreclosure action, and shall be
entitled to its share of appreciation in the real property
as determined under this chapter in lien priority when the
payment is applicable . . . .

8
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

appraisal prepared by Appraiser Kathy Ann Oshiro (“Appraiser

Oshiro”) valuing the Property at $505,000.

The Association opposed HHFDC’s motion for summary

judgment, arguing that “HHFDC had based almost its entire

argument on HRS § 201H-47,” which was not retroactive, and that

any retroactive application of HRS § 201H-47 would

unconstitutionally impair the Association’s vested rights. The

Association contended that, under Section 7, HHFDC’s SAE

Agreement rights were extinguished when ASB foreclosed on its

mortgage.6 The Association also argued that, even if HHFDC had

6
Section 7 of the SAE Agreement provides:

FIRST MORTGAGE PROTECTION

The foregoing provisions shall not apply with respect to:

(a) The first purchase money mortgage (“First
Mortgage”), if any, which is being placed on the
Property.
(b) The first purchase money mortgagee (“First
Mortgagee”) named in the First Mortgage, including
the first purchase money mortgagee’s successors
and assigns.
(c) The rights of the First Mortgagee to foreclose
or take title pursuant to the remedies in the
First Mortgage, to accept a deed in lieu of
foreclosure in the event of default by the
Grantee, as mortgagor under the First Mortgage, or
to sell or lease the Property acquired by the
First Mortgagee.
(d) Any Person or persons acquiring the Property as
a result of foreclosure or by a deed in lieu of
foreclosure of the First Mortgage or any
successor, transferee, or assignee of such person
or persons.
. . . .
HFDC specifically subordinates any lien or contingent lien
rights that HFDC may have under this Exhibit C to the lien
of the First Mortgage. Any holder of the First Mortgage or
any person who acquires legal title to the Property as a
result of a foreclosure or a deed in lieu of foreclosure of
(continued. . .)

9
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

an interest in the SAE Agreement, the agreement limited HHFDC’s

interest to the proceeds the Chans would “realize” from the

transfer or sale of the Property7 — “[i]n other words, HHFDC

would recover from the proceeds remaining after payment of all

liens and encumbrances.” The Association maintained that HHFDC

did not comply with Section 3 of the SAE Agreement because

Appraiser Oshiro was not sufficiently qualified to appraise the

Property and HHFDC had not timely notified the Chans of the

appraisal. Finally, the Association contended that HHFDC lacked

standing to foreclose because neither Act 180 nor Act 196 stated

that HHFDC had assumed the Chan deed.

On September 23, 2014, the day before a hearing on HHFDC’s

motion for summary judgment, HHFDC filed an updated appraisal

(the “September Appraisal”) prepared by Appraiser Oshiro, this

time under the supervision of an appraiser who was sufficiently

(. . .continued)
the First Mortgage shall acquire legal title free of such
lien or contingent lien rights that HFDC may have under
this Exhibit C. This Exhibit C shall be null and void upon
a conveyance of the Property through a foreclosure sale or
a deed in lieu of foreclosure.

(Emphasis added.)
7
The SAE Agreement provides, in relevant part: “Under the Program, which
is described in this Exhibit C, the Grantee agrees to pay to HFDC a share of
the “Net Appreciation” which the Grantee realizes or is deemed to have
realized upon the sale or transfer of the Property . . . .”
The SAE Agreement did not define the meaning of “realizes or is deemed
to have realized.” Black’s Law Dictionary defines “realization” as:
“Conversion of noncash assets into cash assets.” Realization, Black’s Law
Dictionary (11th ed. 2019).

10
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

qualified under the SAE Agreement. The September Appraisal

claimed the current fair market value of the Property was

$480,000 and that HHFDC’s Net Appreciation share was $228,532.8

On December 9, 2014, ASB filed a motion for confirmation of

sale, asking the circuit court to determine the priority of the

parties’ claims and the amount of HHFDC’s claim. On January 15,

2015, a hearing was held on ASB’s motion for confirmation of

sale at which bidding was reopened, and the Association

purchased the Property for $370,000. The Association argued

that the Property’s fair market value should equal the $370,000

purchase price.

On March 4, 2015, the circuit court entered an order

granting HHFDC’s motion for summary judgment (“order granting

HHFDC’s motion for summary judgment”), ruling that HHFDC’s lien

was senior and superior to the Association’s. On the same day,

the court entered an order granting ASB’s motion for

confirmation of sale (“order confirming sale”) and judgment on

the order (“March 4, 2015 judgment”).9

8
HHFDC determined that the Net Appreciation of the Property was $368,600
by subtracting the Chans’ original purchase price ($111,400) from the
September Appraisal’s fair market value ($480,000). HHFDC then determined
its Net Appreciation share was $228,532 by multiplying its percentage share
(62%) by the Net Appreciation ($368,600).
9
The March 4, 2015 judgment appears to mistakenly refer to the order
granting ASB’s motion for summary judgment. However, the March 4, 2015
Judgment provides the hearing date for ASB’s motion for confirmation of sale.
Furthermore, the order granting ASB’s motion for summary judgment and
corresponding judgment were entered on May 12, 2014.

11
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

On March 9, 2015, the circuit court filed a minute order

concluding the fair market value of the Property was $480,000

and that HHFDC’s Net Appreciation value was $228,532.

On March 25, 2015, HHFDC submitted a proposed further order

regarding ASB’s motion for confirmation of sale (“further order

re: confirmation of sale”) stating that $480,000 was the fair

market value of the Property and that HHFDC’s Net Appreciation

value was $228,532. On April 2, 2015, the Association appealed

under CAAP-XX-XXXXXXX the order granting HHFDC’s motion for

summary judgment, order confirming sale, the March 4, 2015

judgment, and the proposed further order re: confirmation of

sale, which the court had not yet entered.

On April 16, 2015, the circuit court entered judgment on

the order granting HHFDC’s motion for summary judgment

(“judgment on order granting HHFDC’s motion for summary

judgment”). On April 17, 2015, the circuit court entered the

further order re: confirmation of sale. The Association filed a

motion for reconsideration of the further order re: confirmation

of sale on April 27, 2015 (“motion for reconsideration”).10

On May 7, 2015, the Association appealed under CAAP-15-

10
According to the Association, as of the filing of its opening brief on
September 8, 2015, the circuit court had “not disposed of the Motion for
Reconsideration and it is therefore deemed denied pursuant to Hawaiʻi Rules of
Appellate Procedure (“HRAP”) Rule 4(a)(3).”

12
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

0000395 the further order re: confirmation of sale and judgment

on order granting HHFDC’s motion for summary judgment.

On June 4, 2015, the ICA consolidated the Association’s

appeals under CAAP-XX-XXXXXXX.

C. ICA Proceedings

1. The Association’s Arguments

On appeal to the ICA, the Association repeated the

arguments in its opposition to HHFDC’s motion for summary

judgment.

Additionally, the Association argued that, if HHFDC had a

valid lien, HHFDC impermissibly used the Section 3 appraisal

process to determine the Property’s fair market value because

the appraisal process applied only if the Chans “sell or

transfer” the Property. The Association asserted that Section 2

of the SAE Agreement distinguished a “sale or transfer” from

foreclosures, and therefore a foreclosure could not trigger the

appraisal process.11 The Association argued the circuit court

11
Section 2 of the SAE Agreement outlined three situations in which “[a]
sale or transfer of the Property will be deemed to have taken place[:]”

(a) When the Grantee sells or transfers the Property or any
legal or beneficial right, title or ownership interest
in the Property, including by way of an agreement of
sale or a lease with an option to purchase the Property;
(b) When the Grantee no longer uses the Property as
Grantee’s principal residence but continues to retain
legal and/or equitable title to the Property; or
(c) When the Grantee rents the Property or any part of the
Property to someone else but continues to retain legal
and/or equitable title to the Property.

13
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

should have used the foreclosure sale price as the Property’s

fair market value.

The Association argued the circuit court erred in granting

HHFDC’s motion for summary judgment because genuine issues of

material fact existed regarding HHFDC’s calculation of the Net

Appreciation, the Property’s fair market value, and HHFDC’s

failure to comply with Section 3’s appraisal process. The

Association additionally argued the circuit court erred by

denying its motion for reconsideration because the Association

did not have the opportunity to review the September Appraisal

before the motion for summary judgment hearing.

2. HHFDC’s Arguments

HHFDC also repeated its arguments below. In addition,

HHFDC asserted that the circuit court did not need to rely on

HRS chapter 201H to determine the validity or priority of

HHFDC’s lien, which was established by the deed and SAE

Agreement.

HHFDC argued the appraisal process applied because the SAE

Agreement provided that HFDC would “immediately be entitled to a

share of the Net Appreciation” if the Property were ever “sold

or transferred . . . in any manner, voluntarily or

involuntarily, including a judicial or nonjudicial foreclosure

sale.” The agreement also provided that HFDC would select an

14
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

appraiser to determine the fair market value “[w]henever it

shall become necessary to determine the Net Appreciation

. . . .” Therefore, the appraisal process was triggered when

HHFDC became entitled to its Net Appreciation share upon

foreclosure because it was “necessary to determine the Net

Appreciation” to calculate HHFDC’s share. HHFDC also maintained

that the Property’s fair market value was $480,000 based on the

September Appraisal.

HHFDC asserted the foreclosure sale was a “sale” entitling

HHFDC to its Net Appreciation share because, under Section 2, if

the Chans were “divested of title . . . in any manner,

voluntarily or involuntarily, including a judicial or

nonjudicial foreclosure sale, HFDC [would] immediately be

entitled to a share of the Net Appreciation.” HHFDC also

contended that, reading the SAE Agreement as a whole, Section 7

only nullified the agreement as to the purchaser acquiring the

Property as a result of a foreclosure. Finally, HHFDC claimed

the circuit court properly granted summary judgment because the

issues of HHFDC’s Net Appreciation share, the Property’s fair

market value, and HHFDC’s compliance with the appraisal process

were not material as to the validity and priority of HHFDC’s

lien.

15
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

3. Memorandum Opinion

On July 26, 2019, the ICA issued its memorandum opinion.

American Savings Bank, F.S.B. v. Chan, Nos. CAAP-XX-XXXXXXX &

CAAP-XX-XXXXXXX (App. July 26, 2019) (mem.). In addressing the

Association’s argument that the circuit court retroactively

applied HRS chapter 201H in granting summary judgment, the ICA

noted the circuit court’s reliance on HRS chapter 201H was

unclear because the circuit court did not provide the basis for

its ruling. Chan, mem. op. at 8-9. The ICA determined that the

“first in time, first in right” principle and the dates HFDC and

the Association had filed and perfected their liens were “all

the Circuit Court needed to rely on in determining lien

priority.” Chan, mem. op. at 9-10. Therefore, the ICA

concluded the Association’s retroactivity argument was without

merit. Chan, mem. op. at 11.

The ICA then considered the Association’s argument that the

circuit court had disregarded the express language of Section 7

of the SAE Agreement. Id. Reading the SAE Agreement as a

whole, the ICA determined that the Association’s interpretation

that Section 7 extinguished HHFDC’s rights upon foreclosure of

the first mortgage was “against the clear purpose and effect of

Section 7” to protect the first mortgagee and the parties that

acquired the Property as a result of foreclosure. Chan, mem.

op. at 15.

16
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

Next, the ICA turned to the Association’s argument that the

circuit court erred by not using the Property’s $370,000 sale

price as its fair market value. Chan, mem. op. at 16. While

the ICA recognized that courts may generally consider the

foreclosure sale price in determining fair market value, the ICA

did “not agree that Sections 1.E, 2, and 3 together require that

the foreclosure sale price must be used in calculating Net

Appreciation.” Chan, mem. op. at 17. The ICA also concluded

that, reading Sections 1.E, 2, and 3 together, the appraisal

process applied to foreclosure sales. Id.

The ICA held, however, that HHFDC failed to comply with the

Section 3 appraisal process because Appraiser Oshiro was not

sufficiently qualified and HHFDC did not timely mail the

September Appraisal to the Chans. Chan, mem. op. at 17-18. The

ICA concluded the circuit court “erred to the extent that it

utilized the HHFDC’s appraised value of the Property without

confirming the validity of the appraisal process or otherwise

determining that the fair market value of the Property was

$480,000 independent of the HHFDC appraisal.” Chan, mem. op. at

18-19. The ICA vacated the circuit court’s determination of

HHFDC’s Net Appreciation value and remanded for further

proceedings. Chan, mem. op. at 19.

Because the ICA vacated the circuit court’s findings

related to the Property’s fair market value, the ICA did not

17
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

address the Association’s argument that the circuit court erred

by considering new evidence and by not granting the

Association’s Motion for Reconsideration. Id. The ICA did not

address whether HHFDC’s share was limited to the amount the

Chans “realized” from the foreclosure sale.

The ICA then addressed the Association’s argument that the

circuit court erred in finding that HHFDC was HFDC’s successor

to the SAE Agreement. Chan, mem. op. at 19-20. The ICA noted

that Act 350 transferred HFDC’s rights to HCDCH and provided

that all deeds entered into by HFDC would remain “in full force

and effect.” Chan, mem. op. at 21; 1997 Haw. Sess. Laws Act

350, §20 at 1091. Act 196 then split HCDCH into HHFDC and

another entity, and provided that HHFDC would “perform the

functions of housing financing and development.” Chan, mem. op.

at 21; 2005 Haw. Sess. Laws Act 196, § 19 at 620. The ICA held

that the circuit court did not err because HHFDC had assumed

HCDCH’s rights “including those arising out of the Deed and SAE

Agreement,” and Act 196 and Act 350 “suggest[ed] that HHFDC is

HFDC’s successor in interest.” Chan, mem. op. at 21.

Finally, the ICA addressed the Association’s argument that

the circuit court erred in granting summary judgment because

genuine issues of material fact existed regarding the appraisal

process and value of HHFDC’s lien. Chan, mem. op. at 21-22.

The ICA noted that the circuit court only determined HHFDC’s

18
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

lien priority on summary judgment. Chan, mem. op. at 22. The

ICA then reasoned that the facts relating to the appraisal

process and value of HHFDC’s lien were not material because they

did not establish or refute HHFDC’s lien validity or priority.

Id. Therefore, the circuit court did not err in granting

HHFDC’s motion for summary judgment. Id.

The ICA affirmed the order granting HHFDC’s motion for

summary judgment, order confirming sale, March 4, 2015 judgment,

and judgment on order granting HHFDC’s motion for summary

judgment. Chan, mem. op. at 22-23. However, the ICA vacated

the further order re: confirmation of sale “to the extent that

it relates to the value of HHFDC’s interest” and remanded for

further proceedings. Chan, mem. op. at 23.

The ICA entered its judgment on appeal on August 20, 2019.

D. Application for Certiorari

The Association’s Application presents three questions:

[1.] Did the ICA commit grave errors of law and fact by
failing to find that the Circuit Court erred in
retroactively applying [HRS] Chapter 201H, including
HRS §§ 201H-47(a)(6) and 201H-47(e), when if found that
HHFDC had a lien in foreclosure and that such lien was
senior and superior to liens of all other parties except
for a first mortgage lien?
[2.] Did the ICA commit grave errors of law and fact when
it ignored the plain language of [SAE Agreement],
including, without limitation, Sections 2, 3, 4, and 7?
. . . .
[3.] Did the ICA commit grave errors of law and fact when
it failed to hold HHFDC to the same burden of proof that
this Court has required of lenders in foreclosure actions
and granted summary judgment to HHFDC when there were
genuine issues of material fact regarding HHFDC’s standing
and authority to enforce the SAE Agreement?

19
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

First, the Association argues that HRS § 201H-47(e) was not

retroactive, that the law in effect when the deed was recorded

in 1991 was HRS § 201E-221(c), and that under HRS § 201E-221(c),

HFDC would only be entitled to the foreclosure proceeds

remaining after payment of all liens and encumbrances, including

the Association’s liens.

Second, the Association argues the ICA ignored the express

language of the SAE Agreement because: (1) Section 7 voided the

agreement upon the foreclosure of ASB’s mortgage; (2) the

Section 3 appraisal process did not apply because no “sale or

transfer” occurred as defined by Section 1.E; and (3) the

agreement limited HHFDC’s entitlement “to amounts the Chans

received by converting the Property into cash ‘upon the sale or

transfer of the Property.’”

Third, the Association argues HHFDC lacked standing to

enforce the SAE Agreement as HFDC’s successor. The Association

also argues that the powers, functions, and duties transferred

to HHFDC by Act 196 were under HRS chapter 201G, while the Chan

deed was made under HRS chapter 201E. It argues that,

therefore, there was a genuine issue of material fact as to

whether HHFDC was HFDC’s successor.

20
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

III. Standards of Review

A. Contract Interpretation

In Laeroc Waikiki Parkside, LLC v. K.S.K. (Oahu) Ltd.

Partnership, 115 Hawaiʻi 201, 166 P.3d 961 (2007), the Hawaiʻi

Supreme Court stated:

When reviewing the court’s interpretation of a contract,
the construction and legal effect to be given a contract is
a question of law freely reviewable by an appellate court.

. . . .

This court has determined that it is fundamental that terms
of contract should be interpreted according to their plain,
ordinary and accepted use in common speech, unless the
contract indicates a different meaning. Further, in
construing a contract, a court’s principal objective is to
ascertain and effectuate the intention of the parties as
manifested by the contract in its entirety. If there is
any doubt, the interpretation which most reasonably
reflects the intent of the parties must be chosen.

115 Hawaiʻi at 213, 166 P.3d at 973 (internal quotation marks,

citations, and brackets omitted).

B. Statutory Interpretation

The interpretation of a statute is a question of law
reviewable de novo.

When construing a statute, our foremost
obligation is 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. And we must
read statutory language in the context of the
entire statute and construe it in a manner
consistent with its purpose.

Ka Paʻakai O Ka̒aina v. Land Use Comm’n, 94 Hawaiʻi 31, 41, 7 P.3d

1068, 1078 (2000) (internal quotation marks and citations

omitted) (quoting Amantiad v. Odum, 90 Hawaiʻi 152, 160, 977 P.2d

160, 168-69 (1999)).

21
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

IV. Discussion

A. The ICA did not err in finding HHFDC’s lien senior and
superior to the Association’s

The Association argues the ICA erred by failing to find the

circuit court erred in retroactively applying HRS chapter 201H

when it concluded HHFDC’s lien was senior and superior to the

Association’s, and that HRS § 201E-221(c), the law in effect

when the deed and SAE Agreement were entered, entitled HHFDC

only to the foreclosure proceeds remaining after payment of all

liens and encumbrances.

While the circuit court did not state the basis of its

summary judgment ruling, HHFDC’s lien was senior and superior to

the Association’s even under HRS § 201E-221. HRS § 201E-221(c)

provided, in relevant part: “The corporation shall be a party to

any foreclosure action, and shall be entitled to all proceeds

remaining in excess of all customary and actual costs and

expenses of transfer pursuant to default, including liens and

encumbrances of record . . . .” HHFDC’s SAE interest was a

“lien[] and encumbrance[] of record” required to be paid upon

foreclosure under HRS § 201E-221(c), and because HHFDC’s lien

was filed before the Association’s liens, HHFDC’s lien had

priority under the “first in time, first in right” principle.

See HRS § 501-82 (2006); HRS § 502-83 (2006) (establishing

Hawaiʻi as a race-notice jurisdiction). Furthermore, the SAE

22
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

Agreement, which was entered into pursuant to HRS chapter 201E,

provided that HFDC would become entitled to its Net Appreciation

share upon foreclosure and only subordinated HFDC’s interest to

the first mortgagee (ASB). Therefore, the ICA did not err in

affirming the circuit court’s determination of lien priority.

See Strouss v. Simmons, 66 Haw. 32, 40, 657 P.2d 1004, 1010

(1982) (“An appellate court may affirm a judgment of the lower

court on any ground in the record which supports affirmance.”).

B. The ICA did not ignore the plain language of the SAE
Agreement

1. The ICA did not ignore the plain language of Section 7

The Association argues the ICA ignored the plain language

of Section 7 of the SAE Agreement because the last sentence of

Section 7, “[t]his Exhibit C shall be null and void upon a

conveyance of the Property through a foreclosure sale or a deed

in lieu of foreclosure,” meant that the foreclosure of ASB’s

first mortgage voided the SAE Agreement.

However, as the ICA reasoned, Section 7’s “purpose and

effect” was to protect the first mortgagee and those who

acquired the Property through foreclosure. Chan, mem. op. at

15. Section 7 is titled “First Mortgage Protection,” and the

first part of the section specified that the “foregoing

provisions shall not apply with respect to” the first purchase

money mortgage, the first purchase money mortgagee, the rights

23
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

of the first mortgagee to foreclose, and “[a]ny person or

persons acquiring the Property as a result of foreclosure

. . . .” Thus, the ICA did not err in determining that Section

7 did not nullify the SAE Agreement upon ASB’s foreclosure.

2. The Section 3 appraisal process applied

The Association also maintains that the Section 3 appraisal

process did not apply because, under Section 1.E of the SAE

Agreement, an appraisal of the Property’s “fair market value” is

contingent upon a “sale or transfer,” and a foreclosure sale is

not a “sale or transfer” as defined by Section 2.

Section 2 of the SAE Agreement described three situations

in which “[a] sale or transfer of the Property will be deemed to

have taken place[:]”

(a) When the Grantee sells or transfers the Property or any
legal or beneficial right, title or ownership interest
in the Property, including by way of an agreement of
sale or a lease with an option to purchase the Property;
(b) When the Grantee no longer uses the Property as
Grantee’s principal residence but continues to retain
legal and/or equitable title to the Property; or
(c) When the Grantee rents the Property or any part of the
Property to someone else but continues to retain legal
and/or equitable title to the Property.

Section 2, however, did not limit a “sale or transfer” to these

scenarios. Neither did Section 1, which defines the agreement’s

terminology, define “sale or transfer.” Therefore, we interpret

the words “sale or transfer” “according to their plain, ordinary

and accepted use in common speech,” which would include a

24
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

foreclosure sale. Laeroc Waikiki Parkside, LLC, 115 Hawaiʻi at

213, 166 P.3d at 973.

Furthermore, Section 3 of the SAE Agreement provided, in

relevant part, “[w]henever it shall become necessary to

determine the Net Appreciation, HFDC will select an independent

appraiser . . . who shall prepare a written appraisal of the

Fair Market Value of the Property . . . .” Under Section 2,

HFDC would be entitled to its Net Appreciation share “when all

or any part of or interest in the Property is sold or

transferred . . . including a judicial or nonjudicial

foreclosure sale . . . .” Because a foreclosure sale would make

it “necessary to determine the Net Appreciation,” the ICA did

not err in holding that the Section 3 appraisal process applied.

3. HHFDC’s entitlement under the SAE Agreement is not
limited to the amount the Chans “realized”

The Association argues HHFDC’s recovery under the SAE

Agreement was “limited to the funds remaining after payment of

all liens and encumbrances.” Although the ICA did not address

this argument in its memorandum opinion, the Association’s

argument is without merit. The Association essentially argues

that the parties to the SAE Agreement intended to make HFDC’s

lien junior and subordinate to all other liens. This

interpretation of the agreement does not reasonably reflect the

intent of the parties. See Laeroc Waikiki Parkside, LLC, 115

25
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

Hawaiʻi at 213, 166 P.3d at 973. Section 7 of the SAE Agreement

specifically subordinated HFDC’s lien to the first mortgagee’s

lien. If, as the Association argues, HHFDC’s recovery were

“limited to the funds remaining after payment of all liens and

encumbrances,” Section 7 would not need to exist. Therefore,

considering the likely intent of the parties and the SAE

Agreement as a whole, the Association’s argument is without

merit.

C. The ICA did not err in finding HHFDC had standing to
enforce the SAE Agreement

The Association argues there were “genuine issues of

material fact as to whether [HHFDC] was the successor to HFDC

and whether it assumed the rights of HFDC under the SAE

Agreement.”

While the Association argues that HHFDC’s standing is a

genuine issue of material fact, it is actually a question of

law; HHFDC asserts that it assumed HFDC’s rights to the SAE

Agreement by statute. Therefore, we review the ICA’s

determination that HHFDC is HHFDC’s successor in interest to the

SAE Agreement pursuant to Act 196 and Act 350 de novo. Chan,

mem. op. at 21; see Ka Paʻakai O Kaʻaina, 94 Hawai̒i at 41, 7 P.3d

at 1078 (“The interpretation of a statute is a question of law

reviewable de novo.”).

26
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

HHFDC is HFDC’s successor according to the language of Act

350 and Act 196. Act 350 of 1997 created HFDCH, stating that

HFDCH “shall succeed to all of the rights and powers previously

executed” by HFDC, and that “[a]ll deeds, leases, contracts

. . . or other documents executed or entered into by or on

behalf of [HFDC] . . . shall remain in full force and effect.”

§ 20 at 1091. Act 350 also repealed HRS chapter 201E, which was

replaced with HRS chapter 201G. § 18 at 1090; HRS chapter 201G

(Supp. 1997). According to the “Table of Derivation” in the HRS

2005 Supplement, HRS § 201E-221, which governed the SAE Program,

was replaced by HRS § 201G-127.

Act 196 of 2005 split HFDCH into the Hawai̒i Public Housing

Administration and HHFDC. § 19 at 620. Act 196 transferred

HFDCH’s functions relating to financing and state housing

programs under HRS chapter 201G part II subpart F and HRS

chapter 201G part III except subparts D and M to HHFDC. § 21 at

630-31. In the HRS 2005 Supplement, HRS § 201G-127 was under

part II subpart F of HRS chapter 201G — one of the subparts

transferred to HHFDC. Act 196 also transferred all records and

contracts “made, used, acquired, or held by [HFDCH] relating to

the functions transferred to [HHFDC].” § 23 at 631. The act

provided that “[a]ll deeds, leases, contracts . . . or other

documents executed or entered into by or on behalf of [HFDCH] .

. . which are made applicable to [HHFDC] by this Act, shall

27
 *** FOR PUBLICATION IN WEST’S HAWAIʻI REPORTS AND THE PACIFIC REPORTER ***

remain in full force and effect.” § 25 at 632. Finally, the

act amended references to HCDCH to refer to HHFDC. § 26 at 632.

Reading Act 350 and Act 196 together, the legislature

intended for HHFDC to succeed HFDCH and HFDC’s SAE Program

interests. See Ka Paʻakai O Kaʻaina, 94 Hawai̒i at 41, 7 P.3d at

1078 (“When construing a statute, our foremost obligation is 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.”). Because Act 196 transferred HFDCH’s

functions under HRS § 201G-127, which governed the SAE Program

in 2005, to HHFDC, the SAE Agreement was “made applicable” to

HHFDC by Act 196 and remained “in full force and effect.”

Therefore, HHFDC is HFDC’s successor to the SAE Agreement, and

the ICA did not err in affirming the circuit court’s grant of

HHFDC’s motion for summary judgment.

V. Conclusion

We therefore affirm the ICA’s August 20, 2019 judgment on

appeal.

M. Anne Anderson and /s/ Mark E. Recktenwald
Paul A. Ireland Koftinow
For Petitioner/Defendant- /s/ Paula A. Nakayama
Appellant
/s/ Sabrina S. McKenna
Craig Y. Iha,
Sandra A. Ching, and /s/ Richard W. Pollack
Matthew S. Dvonch
for Respondent/Defendant- /s/ Michael D. Wilson
Appellee

28