Opinion ID: 2596174
Heading Depth: 4
Heading Rank: 2

Heading: Plaintiffs' arguments regarding encouraging competitive bidding are unpersuasive.

Text: Plaintiffs contend that a purpose of HRS section 667-5, protecting mortgagors, is served by encouraging competitive bidding at public auction, which would reduce the risk that the mortgaged property will be sold for less than the loan balance. Plaintiffs argue that failure to enforce their contract with Defendant would send a signal to prospective bidders at non-judicial foreclosure sales that their contractual expectations are not subject to protection, and would dampen competitive bidding. Further, failure to enforce the contract would, Plaintiffs argue, encourage sloppy business practices by mortgagees because mortgagees would be assured that they will not be held contractually accountable to purchasers if they fail to exercise due care in foreclosing under power of sale. Plaintiffs are correct that encouraging competitive bidding promotes the protection of mortgagors, one of the purposes of HRS section 667-5. However, their argument that failure to enforce the contract at issue would discourage competitive bidding is unpersuasive. The situation at issue in this case, where a mortgagor cures its default prior to a foreclosure sale conducted pursuant to HRS section 667-5, but through the mortgagee's mistake the sale goes forward anyway, is apparently rare as this is a case of first impression in this jurisdiction despite the fact that HRS section 667-5 was enacted in 1874. See HRS § 667-5 (Supp.2008). Plaintiffs' argument that failure to enforce its contract with Defendant would discourage competitive bidding at nonjudicial foreclosure sales is simply too attenuated. Further, there is no reason to think that failure to enforce the contract at issue would encourage sloppy business practices by mortgagees. It is in the mortgagees' best interests to conduct a foreclosure sale in compliance with the dictates of HRS section 667-5, rather than going through costly litigation to correct an invalid sale. Finally, the parties have been returned to the position they would have occupied had the wrongful sale not occurred. Plaintiffs are entitled to, and have received, return of their downpayment plus accrued interest.