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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-15-0000309; CAAP-15-0000309; 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 

Electronically Filed

Supreme Court

SCWC-15-0000309

21-JAN-2020

11:13 AM
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AMERICAN SAVINGS BANK, F.S.B., a federal savings bank, 

Respondent/Defendant-Cross-Claimant-Appellee.

(SCWC-15-0000395; CAAP-15-0000395; CIVIL NO. 12-1-2466)

______________________________________________________________

SCWC-15-0000309

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
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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 
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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 
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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. . .)
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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. 
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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. . .)
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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 . . . .
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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. . .)
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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).
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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.
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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-15-0000309 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).”
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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-15-0000309.

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.
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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 
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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.
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3. Memorandum Opinion

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

American Savings Bank, F.S.B. v. Chan, Nos. CAAP-15-0000309 &

CAAP-15-0000395 (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. 
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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 
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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 
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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?
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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.
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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)).
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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 
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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 
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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 
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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 
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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.”). 
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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 
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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