Opinion ID: 2596174
Heading Depth: 2
Heading Rank: 1

Heading: The Foreclosure Sale was Invalid Under HRS Section 667-5.

Text: HRS section 667-5 authorizes nonjudicial foreclosure under a power of sale clause contained in a mortgage. HRS § 667-5 (Supp. 2008). Section 667-5 reads in relevant part: Foreclosure under power of sale; notice; affidavit after sale. (a) When a power of sale is contained in a mortgage, and where the mortgagee, the mortgagee's successor in interest, or any person authorized by the power to act in the premises, desires to foreclose under power of sale upon breach of a condition of the mortgage, the mortgagee, successor, or person shall be represented by an attorney who is licensed to practice law in the State and is physically located in the State. The attorney shall: (1) Give notice of the mortgagee's, successor's, or person's intention to foreclose the mortgage and of the sale of the mortgaged property, by publication of the notice once in each of three successive weeks (three publications), the last publication to be not less than fourteen days before the day of sale, in a newspaper having a general circulation in the county in which the mortgaged property lies; and (2) Give any notices and do all acts as are authorized or required by the power contained in the mortgage. Id. (emphasis added). This section specifically requires breach of a condition of the mortgage as a condition precedent to foreclosure. Id. The Muchmores' mortgage contains a power of sale clause, which reads in relevant part: 22. Acceleration; Remedies. Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument . . . The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument and sale of the Property. The notice shall further inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale. If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may invoke the power of sale and any other remedies permitted by Applicable Law. This clause requires the Muchmores to be in default and to have failed to cure the default by the date specified in the notice before Defendant can invoke its power of sale. Prior to August 22, 2008, the Muchmores were in default and Defendant, through its attorney Leu & Okuda, published a notice of Defendant's intent to foreclose pursuant to HRS section 667-5 by public auction to be held on August 26, 2008. On August 20, 2008, HomEq sent a letter to the Muchmores stating that they owed $14,399.84 to bring their loan current and that HomEq expressly reserve[d] its right to continue with any enforcement action until the loan is fully reinstated (no longer delinquent) or is paid in full. On August 22, 2008, the Muchmores wired $14,399.86 to HomEq, which HomEq accepted, thereby reinstating the loan. [1] On August 25, 2008, HomEq advised its vendor to inform Defendant's foreclosure counsel Leu & Okuda to stop the foreclosure sale. The vendor, however, failed to so advise Leu & Okuda and the foreclosure sale went forward on August 26, 2008. HRS section 667-5 specifically requires a breach of a condition of the mortgage before a nonjudicial foreclosure sale can be effected. See HRS § 667-5. In Silva v. Lopez, we stated that [t]o effect a valid sale under power, all the directions of the power must be complied with . . . this is unquestioned. 5 Haw. 262, 263 (Haw. Kingdom 1884). In that case, the mortgage required the mortgagee to effect entry and possession of the property prior to exercising the power of sale, which the mortgagee failed to do. Id. at 264-65. We held that the subsequent sale of the property was invalid pursuant to HRS section 667-5 [2] because the mortgagee failed to comply with the conditions prescribed in the power of sale in the mortgage. Id. at 265. Here, at the time of the foreclosure sale, the Muchmores were no longer in default and, thus, were no longer in breach of the a condition of the mortgage. Without such breach, Defendant could not invoke the mortgage's power of sale clause. The subsequent foreclosure sale did not comply with the requirements of HRS section 667-5 and was, thus, invalid. See Silva, 5 Haw. at 263-65; see also HRS § 667-8 (1993) (allowing an affidavit filed by mortgagee describing the foreclosure sale to be admitted as evidence that the power of sale was duly executed where affiant has in all respects complied with the requirements of the power of sale and the statute).