Court Opinion

ID: 3170209
Source: CourtListenerOpinion
Date Created: 2016-01-16 01:02:39.422657+00
Date Added: 2024-06-11T07:38:48.435844
License: Public Domain

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

                                                              Electronically Filed
                                                              Supreme Court
                                                              SCWC-11-0000697
                                                              15-JAN-2016
                                                              12:28 PM

           IN THE SUPREME COURT OF THE STATE OF HAWAIʻI

                                ---o0o---

  LOUIS ROBERT SANTIAGO, as Trustee of the Louis Robert Santiago
 Revocable Living Trust dated November 17, 1999, as amended, and
YONG HWAN SANTIAGO, as Trustee of the Yong Shimabukuro Revocable
           Living Trust dated July 25, 1996, as amended,
        Petitioners/Plaintiffs-Appellants/Cross-Appellees,

                                    vs.

  RUTH TANAKA, Respondent/Defendant-Appellee/Cross-Appellant.

                            SCWC-11-0000697

         CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
              (CAAP-11-0000697; CIVIL NO. 08-1-0094)

                            JANUARY 15, 2016

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

            AMENDED OPINION OF THE COURT BY POLLACK, J.

                           I.    Introduction

          This case involves the adequacy of disclosures that

were made to the buyer during the sale of a commercial property

and the seller’s subsequent nonjudicial foreclosure and sale of

the property when the mortgage payments were briefly interrupted

because of an underlying dispute regarding mediation concerning
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the property.     Two issues are presented: (1) whether the

seller’s failure to disclose certain facts regarding the

property’s sewer system is actionable under the common-law

causes of action of nondisclosure and misrepresentation and (2)

whether the seller’s nonjudicial foreclosure of the property and

ejectment of the Santiagos were wrongful under the facts of this

case.     We answer both questions in the affirmative.

                              II.   Background

   A.      The Santiagos’ Lease and Purchase of Nawiliwili Tavern

             On January 1, 1998, Louis Santiago (Louis) 1 entered

into a twenty-year commercial lease agreement to rent

approximately 2,560 square feet of ground floor space of the

Nawiliwili Tavern (Tavern) from owner Ruth Tanaka (Tanaka).

After leasing the Tavern for over seven years and making all

payments due under the lease, including his share of utilities,

taxes, assessments, and insurance, Louis and his wife, Yong Hwan

Santiago (collectively, the Santiagos), decided to submit an

offer to purchase the Tavern from Tanaka. 2

      1
            Louis Santiago is referred to herein as “Louis” when he is acting
in his individual capacity. Louis Santiago and Yong Santiago, acting
together, are referred to as “the Santiagos.”
      2
            It does not appear that Tanaka personally participated in the
negotiations. All actions, unless otherwise noted, were taken by her real
estate agent, Wayne Richardson (Richardson) or her attorney.

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               1.    Negotiations for Purchase of Tavern

            In November 2005, Louis, represented by realtor Glenn

Takase (Takase) of Coldwell Banker, submitted an offer to

purchase the Tavern for $1,000,000.00, in the form of a

“Deposit Receipt Offer and Acceptance” (DROA) to Tanaka’s

property manager and realtor, Wayne Richardson (Richardson). 3

      3
            The DROA contained standard terms, including the following
pertinent provisions:

            C-10 Prorations and Closing Adjustments. At closing,
            Escrow shall prorate the following, if applicable, as of
            the date of closing: real property tax, lease rents . . .
            maintenance, private sewer, marina, and/or association
            fees, tenant rents, and ANY OTHERS.

            . . .

            SELLER’S DISCLOSURES (Required by Hawaii Statute for
            residential real property)

            C-44 Seller’s Obligation to Disclose. Under Hawaii law,
            Seller is obligated to fully and accurately disclose in
            writing to Buyer any fact, defect, or condition, past or
            present, that would be expected to measurably affect the
            value of the Property to a reasonable person. . . . Such
            Disclosure shall be prepared in good faith and with due
            care and shall disclose all material facts relating to the
            Property that: (i) are within the knowledge or control of
            Seller; (ii) can be observed from visible, accessible
            areas; or, (iii) which are required by Section 508D-15 of
            the Hawaii Revised Statutes.

            . . .

            C-47 Buyer’s Remedies If Seller Fails to Comply with
            Paragraphs C-44 or C44A. . . . If Seller negligently
            fails to provide the required disclosure statement or
            amended disclosure statement, Seller shall be liable to
            Buyer for the amount of actual damages suffered as a result
            of the negligence. In addition to the above remedies, a
            court may also award the prevailing party’s attorneys’
            fees, courts costs, and administrative fees.

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Tanaka did not accept Louis’ initial offer, and the parties

exchanged multiple counteroffers, all of which referenced and

incorporated the DROA.

            In January 2006, Tanaka submitted a counteroffer with

an attached “Agreement of Sale Addendum to the DROA” (Agreement

of Sale Addendum).        In her Agreement of Sale Addendum, Tanaka

made representations with respect to certain “Monthly

Installments (based on current estimates; exact figures to be

determined and adjusted at closing),” including “Sewer Fee &

Assessments” in the amount of $150.00. 4           The Santiagos rejected

Tanaka’s January 2006 counteroffer.

                     2.     Accepted Purchase Contract

            Ultimately, after further negotiations, Louis accepted

a subsequent counteroffer from Tanaka (Accepted Counteroffer).

The Accepted Counteroffer expressly provided that Tanaka and

      4
            Tanaka provided the following accounting of “Monthly
Installments” within the Agreement of Sale Addendum:

            2. Payment Terms:
            . . .
            A.   Monthly Installments (based on current estimates; exact
                 figures to be determined and adjusted at closing)

           [X]   Buyer Collection Fee:            $50.00
           [X]   Real Property Taxes:             $300.00
           [X]   Insurance Premiums:       $226.00
           [X]   Sewer Fee & Assessments: $150.00
           [X]   Other:   Obatake-Lovell          $50.00
           [X]   Principal and interest:          $9,436.79
           [X]   Estimated Total Monthly Payment:        $10,212.79

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Louis “agree[] to sell/buy the [Tavern] on the terms and

conditions set forth in the DROA as modified by this Counter

Offer.”   The Accepted Counteroffer set the purchase price of the

Tavern at $1,300,000, $800,000 of which was to be paid as a down

payment, with the remaining $500,000 secured by a sixty-month

“Mortgage, Security Agreement and Financing Statement”

(Mortgage) financed by Tanaka.       Attached to the Accepted

Counteroffer were two addenda: a “Purchase Money Mortgage

Addendum” (Mortgage Addendum) setting forth the provisions of

the Mortgage and an “Existing ‘As Is’ Condition Addendum” (“As

Is” Addendum).

            The stated purpose of the “As Is” Addendum was to note

that the “Property [was] being sold in its existing condition”

and that “[e]xcept as may be agreed to elsewhere in [the] DROA,

[Tanaka] will make no repairs and will convey [the Tavern]

without any representations or warranties, either expressed or

implied.”   The addendum stated, however, that “[b]y selling

Property in Existing ‘As Is’ Condition, [Tanaka] remains

obligated to disclose in writing any known defects or material

facts of Property or improvements.”        (Emphases added).

                      3.    Seller’s Disclosures

            In April 2006, Tanaka sent Louis a “Seller’s Real

Property Disclosure Statement” (Disclosure Statement).            The

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Disclosure Statement expressly stated that it was “intended to

assist [Tanaka] in organizing and presenting all material facts

concerning the Property” and that Tanaka is “obligated to fully

and accurately disclose in writing to a buyer all ‘material

facts’ concerning the property.” 5

            The Disclosure Statement further noted, “It is very

important that the Seller exercise due care in preparing

responses to questions posed in the Disclosure Statement, and

that all responses are made in good faith, are truthful and

complete to the best of Seller’s knowledge,” because “Seller’s

agent, Buyer and Buyer’s agent may rely upon Seller’s

disclosures.”       Finally, the Disclosure Statement instructed

Tanaka, in her capacity as the Seller of the Tavern, to answer

all questions and explain all material facts known to her.

      5
            In full, the purpose of the Disclosure Statement is described as
follows:

            Purpose of Disclosure Statement: Pursuant to Hawaii
            Revised Statutes, Chapter 508D (for residential real
            property), and under common law (for all other real estate
            transactions, including the sale of vacant land) a seller
            of residential real property is obligated to fully and
            accurately disclose in writing to a buyer all “material
            facts” concerning the property. “Material facts” are
            defined as “any fact, defect, or condition, past or
            present, that would be expected to measurably affect the
            value to a reasonable person of the residential real
            property being offered for sale.” This Disclosure
            Statement is intended to assist Seller in organizing and
            presenting all material facts concerning the Property.

(Emphasis added).

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           As is relevant to the issues presented in this case,

question 77 of the Disclosure Statement asked, “What type of

waste water/sewage system do you have?”          Tanaka checked boxes to

indicate that the Tavern was “Connected” to a “Private Sewer.”

The last page of the Disclosure Statement provided a space for

Tanaka to provide further explanation of any prior disclosure.

In addition to clarifications pertaining to other questions on

the Disclosure Statement, Tanaka referenced question 77 and

noted that the Tavern’s sewer is a “private sewer line owned by

Anchor Cove.    We are connected.” 6

           Tanaka subsequently disclosed twenty documents

pertaining to different aspects of the Tavern, several of which

were related to the Tavern’s private sewer connection.             One of

the disclosed documents was an agreement dated May 16, 1995,

between Tanaka and James Jasper Enterprises, LLP (Jasper), to

connect the Tavern to Jasper’s existing private sewer system.

The agreement, entitled “Agreement for Maintenance and Operation

of Wastewater System and Connection to Wastewater System Located

at Nawiliwili, Kauai, Hawaii” (Wastewater Agreement), provided

     6
             After Takase received and reviewed the Disclosure Statement,
Takase made a handwritten notation--“✓ on →”--in the margin next to Tanaka’s
reference to the private sewer system. Takase testified that his “notation
meant ‘Check on this private sewer line.’” Thereafter, Takase and Louis
reviewed the disclosed documents that related to the private sewer system.

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the following pertinent terms for the maintenance and cleanout

charges:

            5.    Tanaka agrees to pay Jasper monthly maintenance
            charges in the amount of One Hundred Fifty Dollars
            ($150.00) per month, payable on or before the fifteenth day
            of every month, commencing the month immediately after this
            Agreement is executed by the parties hereto. Jasper
            reserves the right to adjust the deposit annually in a sum
            not exceeding twenty percent (20 percent) of the amount
            paid in the year immediately preceding.

            . . .

            7.    Tanaka agrees to pay Jasper the sum of One Hundred
            Fifty Dollars ($150.00) as a bi-monthly cleanout charge for
            the Jasper STP.[7] Such payments shall commence sixty (60)
            days after the execution of this Agreement by the parties,
            and shall be payable on or before the fifteenth day of
            every other month thereafter. Jasper reserves the right to
            adjust the deposit annually in a sum not exceeding twenty
            percent (20 percent) of the amount paid in the year
            immediately preceding.

            8.    Tanaka agrees to pay Jasper the sum of Three Hundred
            Dollars ($300.00) as a deposit for those charges provided
            for in paragraphs 5 and 7 hereinabove. Such amount shall
            be paid upon the execution of this Agreement by the
            parties. The deposit shall be refunded to Tanaka in the
            event the Jasper STP is transferred or conveyed to the
            County.

(Emphases added).

            Based on Tanaka’s disclosures and the $150 estimated

monthly installment for sewer fees and assessments represented

in the Agreement of Sale Addendum, Takase and Louis believed the

costs associated with the Tavern’s private sewer system were the

amounts listed in the Wastewater Agreement--$150 for a monthly

      7
        “Jasper STP” is the short-form used in the agreement for Jasper’s
Anchor Cove Sewage Pump Station.

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maintenance fee and $150 for a bi-monthly cleaning fee.               After

reviewing the disclosures with Takase and believing that Tanaka

had provided all documentation, Louis accepted the disclosed

documents.

  4.      Mortgage, Promissory Note, and Closing on Sale of Tavern

             As noted, to finance a portion of the purchase price

of the Tavern, the Santiagos obtained a mortgage from Tanaka.

In the Mortgage, the Santiagos covenanted to pay the $500,000

loan pursuant to the terms of a Promissory Note.

             The Mortgage provided that in the event of any default

“in the performance or observance of any covenant or condition”

of the Mortgage or the Promissory Note, “the whole amount of all

indebtedness owing” under the Mortgage “shall at the option of

the Mortgagee become at once due and payable without notice or

demand.”     Additionally, the Mortgage provided as follows:

             [T]he Mortgagee may, with or without taking possession,
             foreclose [the] Mortgage, by court proceeding (with the
             immediate right to a receivership with the aforesaid powers
             on ex parte order and without bond pending foreclosure),
             or, as now or then provided by law, by advertisement and
             sale of the mortgaged property or any part or parts thereof
             at public auction in the county in which the mortgaged
             property are situated . . . .

(Emphases added).

             The Promissory Note provided that payment of $9,724.63

was due on the tenth day of each month, commencing on August 10,

2006, until the satisfaction of the debt on August 10, 2011.                  It

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additionally stated that the failure to pay “any sum” due under

the Promissory Note constitutes an “Event of Default” and that

“[i]f any Event of Default shall occur and be continuing, the

entire principal sum and accrued interest thereon” shall

“immediately become due and payable.”        (Emphasis added).

          The parties closed the sale pursuant to the U.S.

Department of Housing and Urban Development Settlement Statement

(HUD Statement) on August 10, 2006, and the deed transferring

the Tavern’s title from Tanaka to the Santiagos was recorded on

the same day.   The HUD Statement identified the prorated amounts

of property taxes and partial month rent due under the

Santiagos’ former lease agreement, but it was silent as to

“maintenance, private sewer, marina, and/or association fees”

required to be listed, if applicable, in accordance with

paragraph C-10 of the DROA. 8     The HUD Statement additionally

indicated that the total amount due from the Santiagos,

including all prorations and closing costs, was $1,317,518.31,

an amount that the Santiagos paid as follows: $5,000 as an

     8
          See note 3 for the full text of paragraph C-10 of the DROA.

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initial deposit, $812,518.31 as an additional deposit, and the

remaining $500,000 in accordance to the Mortgage. 9

                         B.    Sewer Fee Dispute

             At the beginning of October 2006, Jay Geffert

(Geffert), the Santiagos’ property manager for the Tavern,

received a bill from Jasper in the amount of $3,467.43--

$2,267.77 past due from August’s sewer maintenance fees and

$1,153.23 for September’s sewer maintenance fees, inclusive of

taxes. 10   Geffert, believing Jasper’s bill to be a mistake--at

the time, he had been paying the Tavern’s utility bills,

including county sewage bills, since 1998--contacted Jasper to

inquire about the bill.       In response, Jasper wrote to Louis,

noting that Tanaka had previously paid the sewer fees and that

the fees had increased twenty percent a year, every year, since

1995. 11    Jasper stated that the Tavern could choose an

      9
            The $17,518.31 in excess of the agreed-upon purchase price of
$1.3 million constitute settlement charges, which included title and
recording charges, that the Santiagos had to pay at closing.
      10
            Less than two weeks after the Santiagos closed on the sale of the
Tavern, Jasper sent a bill to Tanaka totaling $2,314.20, $1,153.23 for
monthly private sewer maintenance and $1,153.23 for bi-monthly sewer
cleanout, plus excise taxes. Tanaka notified Jasper that the Tavern had been
sold and instructed that the bill, and all future billings, be sent to the
Santiagos.
      11
            In his letter, Jasper outlined the extent to which the monthly
maintenance charge and bimonthly cleanout charge had been increased since the
Wastewater Agreement was executed: in 1995, Jasper charged $156.25 for
monthly maintenance and the same amount for bimonthly cleanout, and in 2006,

                                                              (continued. . .)
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alternative method of sewage disposal but that, until then, the

Santiagos had to continue paying pursuant to the Wastewater

Agreement.

            Louis’ counsel wrote to Tanaka to further inquire

about the bill that Louis received from Jasper.           Counsel

maintained that although the Agreement of Sale Addendum listed a

$150.00 sewer assessment fee, Tanaka did not disclose the fact

that the sewer fees could, and in fact did, increase by twenty

percent per year.     Counsel asserted that Tanaka never disclosed

the true amount of the fees for the Tavern’s sewer service.                 In

conclusion, counsel stated that had Louis known about the

possibility that the sewer maintenance charges could be

increased by twenty percent per year, he would not have agreed

to pay the amount that he agreed to for the Tavern.

            Louis’ counsel also wrote to Jasper, stating that the

Wastewater Agreement was never assigned to the Santiagos when

Tanaka conveyed the Tavern to them.         Counsel also requested from

Jasper an accounting of his cost and expenses in the maintenance

of the sewage system and suggested that the costs charged to the

Santiagos should be adjusted depending upon the parties’ usage

(. . .continued)

he was charging $1,160.94 for monthly maintenance and the same amount for
bimonthly cleanout.

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of the system.     In a forceful response, Jasper intimated no

interest in negotiating for a lower price because “the price . .

. was agreed to be paid by . . . Tanaka” and because the

Wastewater Agreement “does not just provide for the recovery of

a pro-rated portion of costs.” 12       Jasper also threatened that if

the Santiagos did not “want to be bound by the long standing

Agreement,” he would “arrange for [the] Tavern to be immediately

disconnected from the sewage disposal system.”           Finally, Jasper

outlined three alternatives to which he was open: (1) the

Santiagos pay the total amount owing and agree to be bound to

the Wastewater Agreement; (2) the Santiagos accept a 50%

deferral of the amount due while they commence an action to

recover damages from Tanaka; or (3) the Santiagos disconnect the

Tavern from his sewer system and start building their own.

            In 2007, the Santiagos filed a Complaint in the

circuit court against Jasper and Tanaka asserting claims

pertaining to the Wastewater Agreement.          Tanaka filed a motion

to dismiss, and the court issued an order granting Tanaka’s

motion to dismiss without prejudice to allow the parties to

      12
            Jasper also questioned the Santiagos’ right to demand an
accounting since, at the outset, they were not assigned the Wastewater
Agreement.

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“engage in good-faith mediation in a prompt and cooperative

manner.” 13

      C.      Attempts to Mediate and Initiation of Foreclosure

              Over several months following the circuit court’s

dismissal of the Santiagos’ 2007 complaint, the parties failed

to reach an agreement as to the mediator, or the date, time or

location of mediation.      Notably, the Santiagos were current with

their payments even after they commenced their 2007 action

against Tanaka and during the mediation negotiations between the

parties.      However, when it became apparent that advances in the

mediation proceedings were not forthcoming, and out of

frustration from the inability of counsel to reach an agreement

as to scheduling the mediation and selection of the mediator, on

March 10, 2008, Louis sent Tanaka a handwritten note stating

that he halted payment on his account “due to litigation

problems,” that monthly payments of $10,000 are in a bank

account, and that this arrangement “will continue until

litigation is resolved.” 14

      13
            All circuit court proceedings in this case were presided over by
Judge Kathleen N.A. Watanabe.
      14
            Specifically, Louis’ note stated, “I Louis Santiago has halted
payment on my acc’t due to litigation problems! Monthly payments of $10k are
in a bank acc’t + will continue until litigation is resolved.” As he had
indicated, Santiago “put the ten thousand dollars in a special fund.”

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            On March 11, 2008, one day after Louis sent his

letter, Tanaka sent the Santiagos a “Notice of Default and

Intention to Foreclose.”       Tanaka asserted that because the

Santiagos defaulted on the Promissory Note and Mortgage, “the

entire principal sum and accrued interest, plus attorneys’ fees

and costs, are hereby declared immediately due and payable.”

Tanaka additionally stated that she “has not granted any

extensions of time, renewals, waivers or modifications with

respect to payment or other provisions of the Note.”

            On March 12, 2008, Tanaka’s mortgage servicer sent the

Santiagos a payment notice indicating an amount due of

$10,250.86--$9,764.63 for the principal and interest payment due

on March 10, 2008, and a late fee in the amount of $486.23.                 In

a subsequent letter dated April 3, 2008, Tanaka clarified that

she intended to foreclose under power of sale pursuant to HRS §

667-5 through 667-10 15 at a public auction on May 9, 2008.

            On April 11, 2008, the Santiagos submitted payment for

the March mortgage payment and the late fee, as well as payment

for the April mortgage payment. 16        After receiving the Santiagos’

payment, Tanaka informed the Santiagos that she was willing to

      15
            See note 35 for the complete text of HRS § 667-5.
      16
            A small amount, $15.49, remained due on the account, which Louis
paid several days later, on April 15, 2008.

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postpone the public auction for sixty days, “expressly subject

to two conditions: (1) [the Santiagos] must meet their payment

obligations, including, but not limited to, attorneys’ fees and

costs; and (2) [the Santiagos] must not file any lawsuit.”

Tanaka additionally stated that she “ha[d] not postponed the

acceleration of the Note and Mortgage,” but “to facilitate the

mediation, [she] [was] willing to accept monthly payments,

without waiving [] rights and remedies in any respect.”             The

Santiagos thereafter continued to make their monthly mortgage

payments, plus an additional $235.37 principal payment each

month, and paid Tanaka $15,146.11 in satisfaction of Tanaka’s

demand for attorneys’ fees. 17

            On May 5, 2008, a mediation session was scheduled for

June 12, 2008.     However, on the same day, because Tanaka did not

cancel the scheduled auction sale of the Tavern but only

postponed it subject to two conditions, the Santiagos commenced

      17
            Preferred Contract Management, Inc., the agency responsible for
collecting the Santiagos’ mortgage payments and transmitting them to Tanaka,
notified the Santiagos that from September 2006 through June 2008, they had
paid the following on the mortgage:

            Interest Paid to date: $ 48,125.96
            Principal Pmt to date: $ 170,593.30
            Late Charges to date: $ 486.23
            Attorney Fees to date: $15,146.11
            Collection fees to date: $810.00

            Total amount of Money Received: $235,161.60

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an action against Tanaka asserting several claims.           On May 7,

2008, the Santiagos filed a Motion for Temporary Restraining

Order and a Motion for Preliminary Injunction, both seeking to

“prevent and preclude” Tanaka from proceeding with the

foreclosure auction.     The circuit court denied the Motion for

Temporary Restraining Order and scheduled a hearing on the

Santiagos’ Motion for Preliminary Injunction for June 17, 2008.

          Upon learning of the Santiagos’ lawsuit, Tanaka’s

counsel informed the Santiagos’ counsel, on May 15, 2008, that

the postponement offer was being withdrawn, the note and

mortgage “ha[d] been duly accelerated,” and the “entire debt . .

. [wa]s due and payable immediately.”        On June 3, 2008, the

Santiagos and Tanaka agreed to engage in mediation and to

postpone the foreclosure auction during the pendency of

mediation, subject to the Santiagos’ “full compliance with their

payment obligations” and withdrawal of their Motion for

Preliminary Injunction.     Subsequently, on July 14, 2008, Tanaka

filed a mediator’s declaration of impasse and announced that she

was “proceed[ing] with the public auction” on August 14, 2008.

                 D.    The Santiagos’ 2008 Complaint

          On August 5, 2008, the Santiagos filed a First Amended

Verified Complaint in which they asserted claims of negligent

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misrepresentation and nondisclosure against Tanaka. 18           On August

20, 2008, the Santiagos filed a Motion for Temporary Restraining

Order, again seeking to prevent Tanaka from proceeding with the

foreclosure auction.      The circuit court denied the Santiagos’

motion later that day. 19

            On August 27, 2008, the parties stipulated that the

Santiagos would withdraw without prejudice their Motion for

Preliminary Injunction and that Tanaka would postpone the

foreclosure sale pending the circuit court’s ruling on Tanaka’s

yet to be filed motion to dismiss.         The motion to dismiss was

subsequently filed, and after conducting a hearing on October

15, 2008, the circuit court granted in part and denied in part

Tanaka’s motion.

            Two days later, on October 17, 2008, Tanaka sent the

Santiagos a letter informing them that the public auction of the

Tavern was to be held on October 24, 2008.          On October 24, 2008,

the Santiagos filed a new Motion for Preliminary Injunction, and

Tanaka filed her Answer to the Santiagos’ First Amended Verified
      18
            The Santiagos additionally asserted claims for “breach of
agreement,” “breach of good faith and fair dealing,” “breach of duty of good
faith mediation,” and “violation of HRS § 667-42.” These claims were
dismissed by the circuit court.
      19
            The Santiagos filed a series of motions for temporary restraining
orders and motions for preliminary injunctions seeking to “prevent and
preclude” Tanaka from proceeding with the foreclosure auction, all of which
were denied by the circuit court.

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Complaint and asserted eleven counterclaims. 20          On the same day,

Tanaka held a public foreclosure auction at which she purchased

the Tavern by submitting the highest bid of $365,000.00.

    E.      Trial on the Santiagos’ Claims for Nondisclosure and
                           Misrepresentation

            A bench trial was conducted in May 2011, at the

conclusion of which, the circuit court issued its Findings of

Fact (FOF), Conclusions of Law (COL) and Order (Trial Order).

The court found, inter alia, that Tanaka had provided

disclosures indicating that the Tavern’s private wastewater and

sewer system’s monthly service fees may escalate up to twenty

percent annually.     The court found that the Wastewater Agreement

“contains the necessary information to calculate Defendant’s

monthly and bi-monthly charges.”          The court additionally found

that the Santiagos “signed off on these disclosures” and “did

not conduct due diligence with respect to sewer service.”

            The court concluded that after Tanaka “disclosed the

private sewer system,” “she [was] not required to do anything

more.”     In fact, according to the court, Tanaka “was not

required to disclose the Wastewater Agreement” in the first

      20
            Tanaka brought the following counterclaims: “Breach of Note,”
“Breach of Mortgage,” “Breach of Covenant of Good Faith and Fair Dealing,”
“Ejectment,” “Judicial Foreclosure,” “Failure to Mediate in Good Faith,”
“Breach of Confidentiality,” “Violation of Order,” “Waste,” “Impairment of
Security,” and “Rescission.”

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instance because that agreement “does not affect [the

Santiagos].”   Instead, the circuit court concluded that the

Santiagos “had access to all material information” and that

Tanaka “provided timely and appropriate disclosures of all

material facts.”    Accordingly, the circuit court ordered

judgment entered in favor of Tanaka on the Santiagos’ claim for

negligent misrepresentation and nondisclosure.

          With respect to Tanaka’s counterclaims and the

Santiagos’ defenses thereto, the court concluded that HRS § 667-

5 does not require that the Mortgage contain “any particular

words” to effectuate a power of sale and further concluded that

the following language in the Mortgage gave Tanaka the ability

to foreclose by power of sale: “The mortgagee may . . .

foreclose this Mortgage, (1) by court proceeding . . . or, (2)

as now or then provided by law, by advertisement and sale of the

mortgaged property . . . at public auction . . . .”           The court

additionally concluded that the Santiagos did not have a right

to cure the default under the loan documents or Hawaii law.

          Accordingly, the circuit court ordered judgment

entered in favor of Tanaka and against the Santiagos on Tanaka’s

counterclaims for “Breach of Note,” “Breach of Mortgage,”

“Breach of Covenant of Good Faith and Fair Dealing,” and

“Ejectment.”   The court additionally ordered that Tanaka be

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awarded reasonable attorney’s fees and costs in the amount of

$152,246.61.    By its rulings, the circuit court determined that

ownership and possession of the Tavern lawfully belonged to

Tanaka, who was at the same time allowed to keep the

approximately $1.4 million that the Santiagos paid to her

pursuant to the Mortgage and the Promissory Note.

            On June 28, 2011, the circuit court filed its Entry of

Judgment (Judgment) and issued a Writ of Ejectment ordering the

Santiagos to vacate the Tavern.        The Santiagos subsequently

vacated the premises pursuant to the court’s order.

            On July 7, 2011, the Santiagos filed a Motion to

Reconsider, Alter, and/or Amend the Court’s [Trial Order] and

Judgment Thereon (Motion for Reconsideration).           The Santiagos

argued that the law of Hawaiʻi “abhors forfeitures” and that the

court’s “decision and judgment thereon, if left to stand as is,

will result in an over $1.3 million cash forfeiture as the

result of [the Santiagos’] purchase of the [Tavern] and their

full performance under the” purchase contract and loan

documents. 21

      21
             The evidence at trial established that the Santiagos paid Tanaka
$585,161.60 in principal, interest, and fees pursuant to the Promissory Note
and Mortgage as of May 6, 2011, in addition to the $800,000 down payment,
$17,518.31 closing charges, and $10,110.88 in taxes after Tanaka transferred
title to the Tavern back to herself.

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            The Santiagos maintained that the court’s decision

“will result in a grossly inequitable windfall” to Tanaka, in

violation of Hawaiʻi law.      Accordingly, the Santiagos concluded

that they were entitled to restitution of $1,342,455.72. 22

            In response, Tanaka argued that the Santiagos were in

effect seeking rescission of the 2006 sale, which, if granted by

the circuit court, would turn “the trial outcome upside-down,

converting [the Santiagos’] loss into a win (and [Tanaka’s] win

into a loss).”

            In their reply, the Santiagos asserted that they were

entitled to restitution, not rescission of the purchase

contract.    Relying on In re Parish, 2010 WL 1372387, at *2

(Bankr. D. Haw. Apr. 6, 2010), the Santiagos also argued that

the right to cure is an equitable right recognized in Hawaiʻi.

On August 4, 2011, the circuit court issued an Order Denying the

Santiagos’ Motion for Reconsideration.

     22
             The Santiagos reduced the total amount they had paid by
$80,355.99 to offset any actual damages Tanaka had incurred because of the
foreclosure sale: $2,323.64 principal, $12.04 interest, and $78,000.00 as
estimated costs to resell the property, which assumed a six percent broker’s
commission and a sale price of $1.3 million. The reduction was apparently in
light of the trial court’s ruling that the foreclosure had been lawfully
conducted.

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                  III.        Appellate Proceedings

                         A.   Arguments to the ICA

            The Santiagos appealed to the ICA. 23        The Santiagos

argued that the trial court erred in entering judgment for

Tanaka on their claims of nondisclosure and negligent

misrepresentation.       Specifically, the Santiagos claimed that

Tanaka failed to disclose material facts during the course of

the negotiations for the sale of the Tavern, including the

$1,160.94 monthly sewer maintenance fees and the $1,160.94 bi-

      23
            The Santiagos appealed from the Trial Order; the circuit court’s
Judgment, filed June 28, 2011; the Writ of Ejectment, filed June 28, 2011
(Writ of Ejectment); Order Denying “Plaintiffs’ Ex Parte Motion for a
Temporary Stay Pending the July 19, 2011 Hearing on Plaintiffs’ ‘Emergency
Motion for a Temporary Stay of Enforcement of the Court’s Writ of Ejectment
Pending Disposition of Plaintiffs’ Motion to Reconsider, Alter, or Amend the
Judgment and Pending Disposition of Plaintiff’s Motion for Stay Pending
Appeal,’” filed July 14, 2011 (Order Denying the Santiagos’ Motion for a
Stay); Order Denying Plaintiffs’ Emergency Motion for a Temporary Stay of
Enforcement of the Court’s Writ of Ejectment Pending Disposition of
Plaintiffs’ Motion to Reconsider, Alter, or Amend the Judgment and Pending
Disposition of Plaintiffs’ Motion for Stay Pending Appeal, filed August 4,
2011 (Order Denying the Santiagos’ Motion to Stay Ejectment); Order Denying
Plaintiffs’ Motion for a Stay Pending Appeal, filed August 4, 2011; Order
Denying Plaintiffs’ Motion to Reconsider, Alter, and/or Amend the Court’s
Findings of Fact, Conclusions of Law and Order, and Judgment Thereon, filed
August 4, 2011 (Order Denying the Santiagos’ Motion for Reconsideration); and
Order Granting in Part and Denying in Part Defendant/Counter-Plaintiff Ruth
Tanaka’s Motion for Fees and Costs, filed August 22, 2011 (Order Granting
Tanaka’s Fees).

            The Santiagos also challenged the circuit court’s judgment on
Tanaka’s counterclaims of breach of note, breach of mortgage, and ejectment,
and in denying the Motion for Reconsideration.

            Tanaka filed a cross appeal, which is not before this court and,
thus, will not be discussed.

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monthly sewer cleanout charges that Tanaka had been required to

pay.

             Alternatively, the Santiagos contended that Tanaka

failed to disclose that, if the Santiagos were to buy the

Tavern, they would be required either to negotiate with Jasper

for future sewer service or to build their own sewage disposal

system necessary to operate the Tavern.            According to the

Santiagos, they were misled by the documents, included in

Tanaka’s Agreement of Sale Addendum to the DROA, that

represented $150 monthly sewer fee and assessment.

             Additionally, the Santiagos asserted that the trial

court erred in entering judgment in favor of Tanaka on her

counterclaims of breach of note, breach of mortgage, and

ejectment, and in denying the Motion for Reconsideration.                The

Santiagos maintained that the Mortgage did not accord Tanaka the

power of non-judicial foreclosure of the Tavern because the

Mortgage allowed such power only as “now or then provided by

law.”     Hawaiʻi law, according to the Santiagos, does not

independently provide the power of non-judicial foreclosure, and

the Mortgage did not contain a power of sale.

             Further, the Santiagos argued that the circuit court

erred because “the Santiagos cured the alleged default under the

note and [Mortgage] pursuant to” HRS § 667-5(c) over six months

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before the foreclosure auction.        The Santiagos also contended

that the right to cure exists as an “equitable right” in Hawaiʻi.

            Finally, the Santiagos maintained that the trial court

“erroneously awarded Tanaka an additional $152,246.61 in

attorneys’ fees and costs, even though any award of attorneys’

fees and costs should have been offset by the Santiagos’

forfeiture of over $1.4 million paid by them to Tanaka.”

            In her Answering Brief, Tanaka first addressed the

Santiagos’ claim for nondisclosure and misrepresentation.

Tanaka argued that she provided adequate disclosure of the

Wastewater Agreement and that the Santiagos had “all the

information they needed to make further inquiry” but ultimately

failed to exercise due diligence.         Tanaka contended that the

Santiagos “hang their case on a one-line entry of the County

fees (as opposed to the Jasper charges) on a pre-printed

Agreement of Sale form that was rejected and that never became

part of the contract.”

            Additionally, Tanaka argued that the Santiagos’ claims

were moot because the Tavern had since been sold to a third

party. 24   Tanaka also maintained that she did not act in bad

      24
             Tanaka moved to dismiss the Santiagos’ second point of error as
moot because according to Tanaka’s declaration in support of her dismissal
motion, the Tavern had been resold to a third party on May 1, 2012, after the
circuit court rendered its Judgment. On May 24, 2012, the Santiagos filed a

                                                              (continued. . .)
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faith by exercising her contractual right to accelerate the

Mortgage and foreclose upon the Santiagos’ default.             Finally,

Tanaka argued that Hawaiʻi law does not provide for the “right to

cure” and maintained that she never consented to allow the

Santiagos the ability to cure their default.

            In their reply, the Santiagos stated that while they

received a copy of the Wastewater Agreement, the agreement

“clearly did not establish such high payments.”            The Santiagos

also reiterated that the Wastewater Agreement did not apprise

them that “they would . . . have to negotiate for sewer

service[] or construct their own sewage disposal system in order

to operate the [Tavern].”

            The Santiagos further argued that the “plain reading

of [the Wastewater Agreement] establishes fees in the amount of

$150, and allowed only for an increase of the $300 ‘deposit.’”

In conclusion, the Santiagos maintained that the Judgment

“resulted in a forfeiture of the entire $1,412,790.79” that they

paid.

(. . .continued)

memorandum in opposition to the motion.   Subsequently, on June 6, 2012, the
ICA issued an order denying the motion.

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                        B.    The ICA’s Opinion

          On November 28, 2014, the ICA issued its memorandum

opinion (Opinion) in which it affirmed the circuit court’s

Judgment; Trial Order; Writ of Ejectment; Order Denying the

Santiagos’ Motion for Reconsideration; and the Order Granting

Tanaka’s Fees in the circuit court.

          The ICA found that the Santiagos did not show the

circuit court erred in concluding that Tanaka provided

sufficient disclosure of the sewer fees.         The ICA reasoned that,

“[i]n light of Tanaka’s disclosures, the circuit court properly

concluded that the Santiagos should have exercised due

diligence,” which they failed to do by not further investigating

the sewer system.    The ICA concluded that “the Santiagos were

put on notice of the monthly payments made to Jasper and that

Jasper reserved the right to raise payments 20 percent

annually.”

          In evaluating the Santiagos’ nondisclosure claim under

Section 551 of the Restatement (Second) of Torts, the ICA

concluded that the Restatement “only requires a party to correct

a prior representation when the party knows clarification is

necessary to prevent the representation from being misleading.”

The ICA found that the Santiagos did not “make [any] argument

regarding Tanaka’s knowledge” and that “there is no evidence

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suggesting that Tanaka knew clarification was necessary.”             Thus,

in finding that the Wastewater Agreement “provided actual notice

that the Jasper charges were separate from the County fees,” the

ICA concluded that the circuit court did not erroneously rule in

favor of Tanaka on the nondisclosure and misrepresentation

claims.

          The ICA next considered whether the Santiagos’ claims,

that the Mortgage “did not contain a power of sale clause” and

that they “cured the alleged default,” were moot due to Tanaka’s

sale of the Tavern to a third party.        The ICA concluded that it

could not “grant effective relief in terms of title or

possession of the property” in light of the sale of the Tavern.

Accordingly, the ICA did not reach the merits of the Santiagos’

arguments concerning power of sale and cure.          However, the ICA

concluded that the case was not moot as to “the Santiagos’

contention that the circuit court improperly awarded to Tanaka

both the property and all amounts paid by the Santiagos.”

          As to the Santiagos’ claim that Tanaka’s retention of

the Tavern and payments would amount to a windfall, the ICA

concluded that the Santiagos were unable to demonstrate their

entitlement to relief because they remained in possession of the

Tavern for almost three years after foreclosure and because they

did not proffer any evidence to establish the value of the

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Tavern at the time of default or foreclosure so “as to provide

support for an assertion that Tanaka reaped a windfall.”            The

ICA concluded that the circuit court did not abuse its

discretion in denying the Santiagos’ Motion for Reconsideration.

           Accordingly, the ICA affirmed the Judgment and issued

its Judgment on Appeal on January 6, 2015.         The Santiagos filed

an application for writ of certiorari to this court on February

5, 2015.

                   IV.       Standards of Review

           A trial court’s findings of fact are reviewed under

the “clearly erroneous” standard of review.          Beneficial Haw.,

Inc. v. Kida, 96 Hawaiʻi 289, 305, 30 P.3d 895, 911 (2001).            A

finding of fact is determined to be clearly erroneous when “the

record lacks substantial evidence to support the finding,” or

“despite evidence in support of the finding, the appellate court

is left with a definite and firm conviction . . . that a mistake

has been committed.”     Id. (first quoting Alejado v. City & Cty.

of Honolulu, 89 Hawaiʻi 221, 225, 971 P.2d 310, 314 (App. 1998);

and then quoting State v. Kane, 87 Hawaiʻi 71, 74, 951 P.2d 934,

937 (1998)).   The circuit court’s conclusions of law are

reviewed de novo, under the right/wrong standard.           Haw. Nat’l

Bank v. Cook, 100 Hawaiʻi 2, 7, 58 P.3d 60, 65 (2002).

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                                 V.       Discussion

           A.         Nondisclosure and Negligent Misrepresentation

                In Hawaiʻi, claims for nondisclosure are governed by

the Restatement (Second) of Torts § 551 (Am. Law Inst. 1977).

See Molokoa Vill. Dev. Co. v. Kauai Elec. Co., 60 Haw. 582, 590,

593 P.2d 375 (1979); Pancakes of Haw., Inc. v. Pomare Props.

Corp., 85 Hawaiʻi 300, 318, 944 P.2d 97, 115 (App. 1997); Sung v.

Hamilton, 710 F. Supp. 2d 1036, 1047 (D. Haw. 2010) (noting

that, under Hawaiʻi law, fraud can be committed “by non-

disclosure as well as by an affirmative misrepresentation”). 25

Section 551 of the Restatement provides, in pertinent part, as

follows:

                (1)     One who fails to disclose to another a fact that he
                        knows may justifiably induce the other to act or
                        refrain from acting in a business transaction is
                        subject to the same liability to the other as though
                        he had represented the nonexistence of the matter
                        that he has failed to disclose, if, but only if, he
                        is under a duty to the other to exercise reasonable
                        care to disclose the matter in question.

      25
            The allegations supporting the Santiagos’ negligent
misrepresentation claim are fundamentally the same as those supporting the
nondisclosure cause of action. For negligent misrepresentation, the
Santiagos assert that Tanaka misrepresented the true amount of sewer fees
that she was paying Jasper, stating that the amount was only $150 when in
fact it had increased to $1,160.94 for sewer maintenance and the same amount
for bi-monthly cleanout charges. For their nondisclosure claim, the
Santiagos allege that Tanaka failed to disclose the true amount of sewer fees
based on her agreement with Jasper.

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            (2)   One party to a business transaction is under a duty
                  to exercise reasonable care to disclose to the other
                  before the transaction is consummated,

            (b)   matters known to him that he knows to be necessary to
                  prevent his partial or ambiguous statement of the
                  facts from being misleading; . . . .

Restatement (Second) of Torts § 551 (1977) (emphases added).

            The Restatement further explains the circumstances

under which a party in a business transaction has a duty to

disclose facts to the other in order to prevent a partial or

ambiguous statement from being misleading:

            A statement that is partial or incomplete may be a
            misrepresentation because it is misleading, when it
            purports to tell the whole truth and does not. So also may
            a statement made so ambiguously that it may have two
            interpretations, one of which is false. When such a
            statement has been made, there is a duty to disclose the
            additional information necessary to prevent it from
            misleading the recipient. In this case there may be
            recovery either on the basis of the original misleading
            statement or of the nondisclosure of the additional facts.

Restatement (Second) of Torts, § 551 cmt. g (emphasis added).

            In this case, Tanaka’s disclosure duties to Santiago

under the DROA required Tanaka to “fully and accurately disclose

in writing to [the Santiagos] any fact, defect, or condition,

past or present, that would be expected to measurably affect the

value of the Property to a reasonable person.” 26          (Emphases

added).    In disclosing these facts, Tanaka was expected to, and

      26
            Although the parties exchanged numerous counteroffers, there was
only one DROA, dated November 23, 2005. Each counteroffer referenced and
incorporated the DROA’s terms, unless otherwise expressly amended by the
counteroffer.

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indeed was required to, prepare the disclosures “in good faith

and with due care” and ensure that she “disclose[d] all material

facts relating to the Property that [] [were] within [her]

knowledge or control.”     (Emphasis added).      The DROA further

provided, “At closing, Escrow shall prorate the following, if

applicable, as of the date of closing: real property tax, lease

rents . . . maintenance, private sewer, marina, and/or

association fees, tenant rents, and ANY OTHERS.”           (Emphases

added).

          Attached to the Accepted Counteroffer were a Mortgage

Addendum, which set forth the provisions of the seller-financed

Mortgage, and an “As Is” Addendum.        Pursuant to the “As Is”

Addendum, Tanaka “remain[ed] obligated to disclose in writing

any known defects or material facts of [the Tavern].”            (Emphasis

added).

          As required by her duty under the DROA and “As Is”

Addendum, on April 4, 2006, Tanaka sent the Santiagos her

Disclosure Statement.     The Disclosure Statement provided that

Tanaka, “[p]ursuant to Hawaii Revised Statutes, Chapter 508D

(for residential real property), and under common law (for all

other real estate transactions),” was “obligated to fully and

accurately disclose in writing to a buyer all ‘material facts’

concerning the property.”      (Emphases added).      It also defined

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“material facts” as “any fact, defect, or condition, past or

present, that would be expected to measurably affect the value

to a reasonable person of the residential real property being

offered for sale.”    (Emphasis added).      The Disclosure Statement

underscored that the “Seller’s agent, Buyer and Buyer’s agent

may rely upon Seller’s disclosures.”        (Emphasis added).

           In her responses in the Disclosure Statement, Tanaka

noted that the Tavern was connected to a private sewer system.

The last page of the Disclosure Statement provided space for

Tanaka to provide further explanation or clarification to her

answers.   With respect to the sewer, Tanaka wrote only that

“it’s a private sewer line owned by Anchor Cove.           We are

connected.”

            Roughly a week after sending her Disclosure

Statement, Tanaka provided the Santiagos the Wastewater

Agreement dated May 16, 1995.       The Wastewater Agreement provided

that Tanaka agreed to pay Jasper $150 per month for monthly

maintenance charges and $150 as a bi-monthly cleanout charge.

Also indicated in the Wastewater Agreement was Jasper’s

reservation of “the right to adjust the deposit annually in a

sum not exceeding twenty percent (20%) of the amount paid in the

year immediately preceding.”      (Emphasis added).

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          After the Santiagos reviewed Tanaka’s Disclosure

Statement and other disclosed documents with Takase, the

Santiagos signed off on the disclosures, believing that Tanaka

“provided all of the documentation.”        Based on Tanaka’s

disclosures, specifically the Wastewater Agreement, and

representations during negotiations--namely, Tanaka’s estimate

of monthly expenses provided in her Agreement of Sale Addendum--

Takase and the Santiagos believed that the costs associated with

the private sewer system were $150.00 per month for maintenance

and $150.00 bi-monthly for cleanout charges.

          At closing, pursuant to paragraph C-10 of the DROA, 27

escrow prepared an HUD Statement, based on information provided

by Tanaka, that itemized the fees and prorated amounts due from

the Santiagos to complete the sale, including prorated property

taxes and partial month rent due under the Santiagos’ former

lease agreement.    However, the HUD Statement did not include

prorated private sewer fees even though the sale closed in the

middle of the month and the DROA expressly required such an

itemization.   Takase testified that had the sewer fees been

prorated on the HUD statement, he and the Santiagos “would have

     27
          See supra note 3.

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found out” about the actual amount due for Jasper’s private

sewer service.

            The foregoing facts clearly establish that Tanaka did

not disclose to the Santiagos the true amount of the private

sewer fees while they were negotiating for the sale of the

Tavern in 2006.     Further, the uncontroverted evidence

demonstrates that Tanaka paid the private sewer fees prior to

the Santiagos’ purchase of the Tavern and, thus, knew not only

the amount of the monthly and bi-monthly charges but also that

the fees had increased each year by 20%.

            Despite her knowledge, Tanaka never informed the

Santiagos that the amount due under the Wastewater Agreement was

(1) the single largest ownership expense of the Tavern,

approximately equal to 20% of the agreed-to monthly mortgage

payments, 28 or (2) subject to an increase of 20% each year, which

Jasper had implemented annually since the inception of the

Wastewater Agreement in 1995.        Further, although Richardson

testified that the Santiagos were “not bound by [the]

agreement,” Tanaka did not disclose that if the Santiagos chose

not to accept the terms of the Wastewater Agreement, they would

      28
            Richardson acknowledged that the Jasper sewer fees were the
highest operating expense for the Tavern.

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be required to (1) attempt to negotiate a new agreement with

Jasper or (2) construct their own sewer system.

            It cannot be seriously disputed that the difference

between a sewer service fee of $225 monthly and the true price

of approximately $1,700 per month, 29 and the possibility of

having to build a completely new sewer system if the Santiagos

were to refuse binding themselves to the Wastewater Agreement,

are facts that “may justifiably induce” the Santiagos, or any

reasonable person standing in their shoes, to “act or refrain

from acting” in the purchase of the Tavern, Restatement (Second)

of Torts § 551(1), by seeking to renegotiate the terms of the

Promissory Note and Mortgage, recalibrating the agreed-upon

price, or walking away from the transaction altogether.             Indeed,

Louis testified that he and his wife would not have purchased

the Tavern for $1.3 million had they known the actual sewer fees

and the terms under which those fees could be increased

annually.    The substance and significant character of the

undisclosed facts, and the incomplete and misleading nature of

      29
            Because the disclosed sewer fees are composed of $150 for
maintenance fees per month and $150 bi-monthly (or $75 per month) for
cleanout charges, the total monthly sewer fees based on Tanaka’s disclosures
is $225. The $1,700 per month figure is the sum of the $1,160.94 monthly
maintenance fees and half of the $1,160.94 bi-monthly cleanout charges (or
approximately $600 per month) that Jasper was actually charging for his sewer
service.

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the disclosed facts, leave little room for doubt that they may

have “justifiably induce[d]” the Santiagos to “act or refrain”

from taking actions in their purchase of the Tavern.           Id.

           Tanaka’s knowledge that these facts would cause

justifiable inducement on the Santiagos’ part was established by

Tanaka’s awareness of the actual, non-disclosed price for

Jasper’s sewer service, the disparity between the actual price

and the disclosed price, the failure to clarify that the price

had been actually subject to significant annual increases

although the Wastewater Agreement provided that the increase was

to be applied only to the deposit, and the fact that the

Disclosure Statement that Tanaka completed unequivocally stated

that the Santiagos and Takase may rely upon her representations

therein.   See Jones v. Great Am. Life Ins. Co., No. 2:13-CV-

02153, 2015 WL 417909, at *5 (W.D. Ark. Jan. 30, 2015)

(inferring from the facts and circumstances the defendant’s

knowledge of the falsity of the representation).           The aggregate

of these facts demonstrates Tanaka’s knowledge that her

inaccurate and incomplete disclosure could have been relied upon

by, and thus may have justifiably induced, the Santiagos to act

or to refrain to act.

           Additionally, Tanaka’s representation in the Agreement

of Sale Addendum--that “based on current estimates,” the “Sewer

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Fee & Assessments” were $150--proved to be a partial, ambiguous,

and misleading statement. 30      Richardson testified that the amount

reflected under “Sewer Fee & Assessments” constituted the county

sewer fees, not the private sewer fees.          But Geffert, who had

been paying county sewer fees for eight years at the time the

parties were negotiating for the sale of the Tavern, testified

that county sewer fees were more than double the amount under

“Sewer Fee & Assessments.”       Further, based in part on the size

of the Tavern and the Santiagos’ knowledge of the building and

expenses paid during their seven-year tenancy, the Santiagos

believed Tanaka’s estimate of $150 reflected the amount of the

private sewer fees.

            Because Tanaka’s representation on the Agreement of

Sale lacked additional information or clarification, the

estimated “Sewer Fee & Assessments” was ambiguous.            Thus, under

comment g of Section 551 of the Restatement, because Tanaka’s

statement was subject to two possible interpretations, one of

      30
            Although the Agreement of Sale Addendum was part of a rejected
counteroffer and thus did not become part of the contract between the
parties, her representations therein are relevant to the Santiagos’ claims
for nondisclosure and misrepresentation.

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which was false, Tanaka was required to provide further

disclosures to prevent her statement from being misleading. 31

           Tanaka subsequently disclosed the Wastewater Agreement

that, on its face, appeared to confirm the Santiagos’

interpretation of Tanaka’s “Sewer Fee & Assessments” estimate.

The Wastewater Agreement provided that Tanaka paid Jasper $150

in monthly private sewer maintenance charges and $150 in bi-

monthly sewer cleanout charges, the same numerical amount

indicated in Tanaka’s estimate.        Consequently, Tanaka’s

representation on the Agreement of Sale Addendum appeared to

confirm that the fees listed within the Wastewater Agreement

were accurate.

           Tanaka’s contention throughout this case, that the

express terms of the Wastewater Agreement provided that Jasper

could increase the monthly and bi-monthly fees by up to 20%

annually and that the Santiagos therefore had adequate notice

that the sewer fees may be greater than $150, is unavailing; the

plain language of the Wastewater Agreement provides that Jasper

only “reserve[d] the right to adjust the deposit annually in a

sum not exceeding twenty percent (20%).”          Thus, contrary to

      31
            Additionally, “[t]his court has affirmed the general rule that,
in interpreting contracts, ambiguous terms are construed against the party
who drafted the contract.” Luke v. Gentry Realty, Ltd., 105 Hawaiʻi 241, 249,
96 P.3d 261, 269 (2004).

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Tanaka’s argument, the Wastewater Agreement provides a

reservation to increase the deposit, not the monthly sewer

maintenance fees or the bi-monthly sewer cleanout fees.

          Tanaka’s contention is further refuted by trial

testimony supporting the conclusion that the terms of the

Wastewater Agreement were, at best, ambiguous and misleading.

Richardson acknowledged that the plain terms of the agreement

did not state that the monthly and bi-monthly fees could be

increased by 20% per year.      Richardson specifically testified

that “perhaps the people who drafted [the agreement] made an

error” by providing that the “deposit” rather than the

“maintenance fee” could be increased by up to 20% a year.

          On the other hand, the Santiagos’ realtor, Takase,

testified that based on all the disclosures he received, he

believed that the sewer fees were “$150 for a maintenance fee,

and $150 cleaning fee,” as stated on the face of the Wastewater

Agreement.   Thus, if in fact the Wastewater Agreement provided

that Jasper had the ability to increase the monthly and bi-

monthly fees by 20% a year, the drafting “mistake” rendered the

otherwise plain and clear provisions of the Wastewater Agreement

ambiguous and misleading.      Thus, Tanaka had a “duty to disclose

the additional information necessary to prevent” the Wastewater

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Agreement from misleading the Santiagos.         Restatement (Second)

of Torts § 551(2)(c).

           An additional opportunity for Tanaka to apprise the

Santiagos of the true price for Jasper’s sewer service arose at

closing, when Tanaka was contractually bound, in accordance with

paragraph C-10 of the DROA, to direct escrow to complete the HUD

form to reflect, among other things, private sewer fees.            At

this juncture, Tanaka again failed to clarify the ambiguity and

inaccuracy of her previous disclosures by not specifying the

appropriate proration of Jasper’s sewer fees, which, according

to Takase, could have alerted the Santiagos to the true costs.

           Thus, under Section 551 of the Restatement, to prevent

her partial and ambiguous statements from being misleading,

Tanaka had a duty to disclose the monthly amount of the sewer

fees.   By failing to disclose the amount of the Tavern’s monthly

sewer fees, Tanaka breached this duty.

           Accordingly, for the reasons discussed, the circuit

court’s Trial Order was based on multiple erroneous findings and

misapprehension as to the applicable law.         First, contrary to

the circuit court’s findings and conclusions that the Santiagos’

alleged failure to conduct due diligence barred their claims for

nondisclosure and misrepresentation, “[the] duty to avoid

misrepresentations is so strong that the deceived party is not

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charged with failing to discover the truth.”           V.S.H. Realty,

Inc. v. Texaco, Inc., 757 F.2d 411, 415 (1st Cir. 1985) (citing

Snyder v. Sperry & Hutchinson Co., 333 N.E.2d 421 (Mass. 1975))

(“[I]f the seller’s representations are such as to induce the

buyer not to undertake an independent examination of the

pertinent facts, lulling him into placing confidence in the

seller’s assurances, his failure to ascertain the truth through

investigation does not preclude recovery.”); see also Yorke v.

Taylor, 124 N.E.2d 912, 916 (Mass. 1955) (“The recipient in a

business transaction of a fraudulent misrepresentation of fact

is justified in relying on its truth, although he might have

ascertained the falsity of the representation had he made an

investigation.”).      Thus, Tanaka’s partial and ambiguous

disclosures are not excused by any alleged failure on the

Santiagos’ part to further investigate the information provided

to them. 32    The circuit court’s contrary conclusions and findings

are therefore erroneous.

              Tanaka also had an affirmative duty, based on the

clear contractual terms of the DROA, “As Is” Addendum, and

      32
            Despite the circuit court’s finding that the Santiagos failed to
exercise appropriate due diligence because they “did not take care to protect
their own interest, or obtain professional advice,” the Santiagos were
represented throughout the purchase by Takase, an experienced professional
broker, who guided and assisted them in their purchase of the Tavern. Thus,
the court’s contrary finding is clearly erroneous.

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Seller’s Disclosures, to “fully and accurately disclose in

writing” “all material facts” to the Santiagos prior to

finalizing the sale of the Tavern.         Therefore, Tanaka’s failure

to disclose material facts, standing alone, clearly violated her

duty to disclose, and the circuit court’s conclusion that Tanaka

“was not required to disclose the Wastewater Agreement” is

erroneous.

          Additionally, the circuit court’s finding that the

Wastewater Agreement “provides for annual escalation (up to 20%)

of both the monthly maintenance charges and the bi-monthly

cleanout charge” was clearly erroneous because, as discussed,

the plain, unambiguous language of the Wastewater Agreement

established monthly sewer maintenance fees in the amount of $150

and bi-monthly sewer maintenance fees in the same amount.

Although the agreement provided that Jasper reserved the right

to increase the “deposit” by up to 20% per year, the Wastewater

Agreement did not provide for any increase to the monthly or bi-

monthly sewer fees.     Thus, the circuit court’s conclusion that

the Wastewater Agreement provides for annual escalation of the

sewer fees, and that the agreement “contains the necessary

information to calculate [the Santiagos’] monthly and bi-monthly

charges,” was clearly erroneous.         Similarly erroneous is the

circuit court’s related conclusion that the Santiagos “had

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access to all material information” and that Tanaka “provided

timely and appropriate disclosures of all material facts.”

          For these reasons, the circuit court and the ICA both

erred in concluding that Tanaka did not have a duty to disclose,

and did not breach her duty to disclose, the actual monthly fees

of the private sewer system and the fact that the Santiagos, if

they chose not to accept the terms of the Wastewater Agreement,

would be required to negotiate a new private sewer contract or

otherwise construct their own sewer system.          See Restatement

(Second) of Torts § 551(1).      Additionally, once Tanaka made

partial or ambiguous statements as to the amount of the private

sewer fees, she breached her duty by subsequently failing to

disclose the additional information necessary to prevent her

disclosures and statements from misleading the Santiagos.             See

Restatement (Second) of Torts § 551(2)(b), cmt. g.

          The foregoing facts also establish proof of the

Santiagos’ negligent misrepresentation cause of action.

Negligent misrepresentation has the following elements: “(1)

false information be supplied as a result of the failure to

exercise reasonable care or competence in communicating the

information; (2) the person for whose benefit the information is

supplied suffered the loss; and (3) the recipient relies upon

the misrepresentation.”     Blair v. Ing, 95 Hawaiʻi 247, 269, 21

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P.3d 452, 474 (2001) (citing Restatement (Second) of Torts §

552); Zanakis-Pico v. Cutter Dodge, Inc., 98 Hawaiʻi 309, 321, 47
P.3d 1222, 1234 (2002); see also Chun v. Park, 51 Haw. 462, 468,

462 P.2d 905, 909 (1969) (“We believe § 552 of Restatement

(Second) of Torts . . . is a fair and just restatement of the

law on the issue of negligent misrepresentation.”).

           As discussed, Tanaka provided false information

regarding the sewer charges to the Santiagos by only disclosing

that Jasper’s sewer fees were $150.00 per month for maintenance

and $150.00 bi-monthly for cleanout charges when in fact Tanaka

had been paying Jasper $1,153.23 for monthly private sewer

maintenance and the same amount for bi-monthly sewer cleanout.

Further, Tanaka did not clarify that the express terms of the

Wastewater Agreement, which allowed Jasper to increase the

deposit every year, was inaccurate because the contractual

annual increase was actually being applied to the sewer fees.

With respect to the loss element, the Santiagos were required to

pay substantially more for sewer fees than what Tanaka

represented and what the Wastewater Agreement reflected.            The

reliance element is also established by Louis’ testimony that he

and his wife would not have bought the Tavern had they known the

true amount of sewer fees associated with ownership of the

Tavern.   Accordingly, the uncontroverted evidence established

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that Tanaka is liable for negligent misrepresentation, and the

circuit court and the ICA erred in entering judgment against the

Santiagos on this claim.

B.    The Non-Judicial Foreclosure of the Tavern Under HRS § 667-
                        5 Was Unauthorized

            In 2008, Tanaka conducted a nonjudicial foreclosure

under the provisions of HRS § 667-5 (Supp. 2008).            The circuit

court held that Tanaka “complied with applicable foreclosure

statutes” and that the Santiagos “did not establish any defense

to foreclosure.”     Specifically, the circuit court determined

that the Santiagos’ arguments related to their defense of

wrongful foreclosure to Tanaka’s ejectment counterclaim--that

there was no power of sale in the Mortgage and that they cured

their default--were without merit. 33       Accordingly, the court

issued a writ of ejectment, which the ICA later affirmed.

       33
            On appeal, the ICA did not reach these two issues after
determining that the Santiagos’ challenges to the circuit court’s decision on
Tanaka’s counterclaims were rendered moot by the resale of the Tavern to a
third party, making it impossible to return title and possession to the
Santiagos. Santiago v. Tanaka, No. CAAP-11-0000697 (App. Nov. 28, 2014)
(mem).

            The ICA may have concluded that any challenge to ejectment and
the underlying nonjudicial foreclosure had been rendered moot because it was
not possible to award the classic remedy for such a cause of action: return
of title and possession. However, money damages, which the ICA found were
within its purview to award, may be substituted for title and possession in
certain instances pursuant to the equitable powers of a court in adjudicating
a case arising from a mortgage foreclosure, see infra. Thus, the ICA should
have addressed the Santiagos’ argument as to their right to cure a default
and the lack of a nonjudicial power of sale in the Mortgage.

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1.    The Authority to Contract a Power of Sale under HRS § 667-5

           Prior to its repeal in 2012, 34 HRS § 667-5 authorized

the non-judicial foreclosure of mortgaged property only “[w]hen

a power of sale is contained in a mortgage.”            HRS § 667-5(a). 35

This court examined HRS § 667-5 in Lee v. HSBC Bank USA, 121

Hawaiʻi 287, 218 P.3d 775 (2009), and found that that it

“authorize[d] nonjudicial foreclosure under a power of sale

      34
             HRS §§ 667-5 to 667-10 governed the process of foreclosure by
power of sale (i.e., non-judicial foreclosure) and were within Part I of
Chapter 667. HRS §§ 667-5 to 667-8 were repealed by the legislature in 2012.
2012 Haw. Sess. Law Act 182, § 50 at 684.
     35
           In 2008, HRS §§ 667-5 provided in relevant part as follows:

           (a)     When a power of sale is contained in a mortgage, and
                   where . . . 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
                   . . . person shall be represented by an attorney who
                   is licensed to practice law in the State and is
                   physically located in the State. . . .

           . . .

           (c)     Upon the request of any person entitled to notice
                   pursuant to this section and sections 667-5.5 and 667-
                   6, the attorney, the mortgagee, successor, or person
                   represented by the attorney shall disclose to the
                   requestor the following information:

                   (1)   The amount to cure the default, together with
                         the estimated amount of the foreclosing
                         mortgagee’s attorneys’ fees and costs, and all
                         other fees and costs estimated to be incurred
                         by the foreclosing mortgagee related to the
                         default prior to the auction within five
                         business days of the request; and

                   (2)   The sale price of the mortgaged property once
                         auctioned.

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clause contained in a mortgage.”         Id. at 289, 218 P.3d at 777

(emphases added).    In Lee, the plaintiffs argued, and this court

agreed, that “no state statute creates a right in mortgagees to

proceed by non-judicial foreclosure; the right is created by

contract.”   Id. at at 292, 218 P.3d at 780.

           Thus, this court has held that HRS § 667-5 does not

provide the nonjudicial power of foreclosure but only allows its

creation, if the parties choose to do so, within the four

corners of a contract. See id.; see also Apao v. Bank of N.Y.,

324 F.3d 1091, 1095 (9th Cir. 2003) (finding that HRS § 667-5

“did not confer the power of sale, but merely authorized the

parties to contract for the express terms of foreclosure upon

default”).

           Here, the mortgage states as follows:

           But upon any default . . . the Mortgagee may with or
           without taking possession, foreclose this Mortgage,

           by court proceeding . . . , or,

           as now or then provided by law, by advertisement and sale
           of the mortgaged property . . . at public auction . . . .

(Emphasis added).    The right to sell the Tavern under the

Mortgage is qualified by the phrase “now or as then provided by

law.”   Thus, we analyze the import of “now or as then provided

by law.”

           Under principles of contract interpretation, an

agreement should be construed as a whole and its meaning
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determined from the entire context and not from any particular

word, phrase, or clause.      Ching v. Hawaiian Rests., Ltd., 50
Haw. 563, 565, 445 P.2d 370, 372 (1968).         “Since an agreement is

interpreted as a whole, it is assumed in the first instance that

no part of it is superfluous.”       Restatement (Second) of

Contracts § 203 (1981), cmt. b.       Contract terms should be

interpreted according to their plain, ordinary, and accepted

sense in common speech.     Found. Int’l, Inc. v. E.T. Ige Constr.,

Inc., 102 Hawaiʻi 487, 495, 78 P.3d 23, 31 (2003).           Where a term

or a clause remains open to more than one reading, we construe

any ambiguity “against the party who drafted the contract.”

Luke v. Gentry Realty, Ltd., 105 Hawaiʻi 241, 249, 96 P.3d 261,

269 (2004).

          The Mortgage--the relevant contract in this case--

states that “upon any default . . . the Mortgagee may with or

without taking possession, foreclose this Mortgage . . . as now

or then provided by law . . . . ”        (Emphasis added).     As

written, HRS § 667-5 is the only source from which the

Mortgage’s power to foreclose may be derived.          However, HRS

§ 667-5 does not independently provide for a power of sale, and,

as noted, it only authorizes a sale where such a power is

contained in a mortgage.      Lee, 121 Hawaiʻi at 289, 218 P.3d at

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777.    Thus, the Mortgage does not provide for a power of sale

that would have authorized Tanaka’s nonjudicial foreclosure.

             Alternatively, the clause “as now or then provided by

law” at a minimum creates an ambiguity for two reasons.                First,

as noted, the Mortgage defers to the statute, but the statute

similarly defers to the Mortgage.           The plain language of the

Mortgage creates a chicken-and-egg situation where it is not

clear whether the power of sale is created within the document

(as required by the statute) or created within the statute (as

contemplated by the Mortgage).          Second, the meaning of the

clause “as now or then provided by law” is unclear.              The

Santiagos have represented that the phrase only “allows”

foreclosure as otherwise provided by law.            Another meaning could

be that the phrase “the Mortgagee may . . . foreclose this

Mortgage” creates the power of sale, and the succeeding phrase

“as now or then provided by law” sets forth the manner in which

the power of sale must be exercised.

                Where there is an ambiguity, the ambiguity is

construed against the drafter--Tanaka.            Luke, 105 Hawaiʻi at 249,
96 P.3d at 269.       Thus, if “as now or then provided by law” is

interpreted as an ambiguity, the clause should be given the

meaning that the Mortgage only allows nonjudicial foreclosure as

provided by law.       Since HRS § 667-5, the section under which the

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nonjudicial foreclosure sale was conducted, requires a power of

sale to be contained in a mortgage, Lee, 121 Hawaiʻi at 289, 218
P.3d at 777, a power that the Mortgage in this case did not

provide, Tanaka’s nonjudicial foreclosure was unlawful.            Thus,

the conclusions of law of the circuit court in its Trial Order--

that Tanaka “complied with the applicable foreclosure statutes,”

that the Santiagos “did not establish any defense to

foreclosure,” and that the Santiagos’ “‘power of sale’ argument

is meritless”--are incorrect.

                        2.    The Right to Cure

          The Santiagos have asserted that there is a statutory

right to cure default under HRS § 667-5 and that, pursuant to

that statutory right, they cured any default under the Mortgage,

making the ensuing foreclosure wrongful.         When construing a

statute, courts are bound to give effect to all parts of a

statute, and no clause, sentence, or word shall be construed as

“superfluous, void, or insignificant” if a construction can be

legitimately found that will give force to and preserve all

words of the statute.     Fagaragan v. State, 132 Hawaiʻi 224, 241,

320 P.3d 889, 906 (2014).

          HRS § 667-5(c) provides that “[u]pon the request of

any person entitled to notice . . . the mortgagee . . . shall

disclose to the requestor . . . the amount to cure the default

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. . . .”   Thus, subsection (c) clearly imposes certain

disclosure requirements on the mortgagee intending to foreclose.

The fact that, upon the mortgagor’s request, the mortgagee must

disclose the amount to cure the default, together with the

related obligation to disclose such amount before the auction

sale, implies a right of the defaulting party to cure in order

to prevent foreclosure.     Construing HRS § 667-5(c) as not

providing a right to cure would essentially render meaningless

the express statutory requirement that “[t]he amount to cure the

default” be disclosed upon a mortgagor’s request.           Under such a

construction, the requirement that a mortgagee should disclose

the amount to cure would be superfluous, since that requirement

would have no practical application if there were no predicate

right to cure.    Viewed another way, it is plainly illogical to

have a statutory requirement mandating disclosure of the amount

to cure if, in actuality, there is no statutory right to cure.

See HRS § 667-5(c) (utilizing the word “shall” to signify an

imperative command instead of the permissive modal verb “may”).

            Additionally, unlike a power of sale, which HRS §

667-5 explicitly required to be “contained in a mortgage,” the

amount to cure that a mortgagee must disclose upon the

mortgagor’s request was not statutorily required to have an

independent contractual source.       If the legislature intended a

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right to cure to be agreed upon contractually, it could have

added to HRS § 667-5(c)(1) the qualifier “when contained in a

mortgage,” as it did in the power of sale provision.           The

absence of such a qualifier is supportive of the interpretation

that the right to cure is statutorily provided by HRS § 667-

5(c)(1).

           Finally, our interpretation is consonant with HRS

§ 677-5(c)’s codification of the common-law right to cure a

default.   The purpose that prompted the addition of HRS § 667-

5(c) to the foreclosure statute in 2008 was to “ensure that the

different nonjudicial foreclosure processes include provisions

for interested parties to receive sufficient notice and obtain

information about the intent to foreclose [and] amounts to cure

the mortgage default.”     Conf. Comm. Rep. No. 3-08, in 2008 House

Journal at 1710, 2008 Senate Journal at 793 (emphases added).

Evident from the legislative history of HRS § 667-5(c) is the

recognition that the right to cure a default is intrinsic in the

law and that, therefore, HRS § 677-5(c) merely codified this

right to ensure that interested parties were adequately apprised

of it.

           The common-law right to cure a default originated from

the fundamental premise that “[m]ortgage foreclosure is a

proceeding equitable in nature and is thus governed by the rules

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of equity.”    Beneficial Haw., Inc. v. Kida, 96 Hawaiʻi 289, 312,

30 P.3d 895, 918 (2001).       Because equity abhors forfeitures,

Jenkins v. Wise, 58 Haw. 592, 597, 574 P.2d 1337, 1341 (1978),

and “regards and treats as done what ought to be done,” Bank of

Haw. v. Horwoth, 71 Haw. 204, 211, 787 P.2d 674, 679 (1990), it

is typical in foreclosure cases that a right to cure a default

and stop the foreclosure continues up to the day of the

confirmation of the sale.       Hoge v. Kane, 4 Haw. App. 533, 541,

670 P.2d 36, 41 (1983).       Thus, Hawaii’s courts “would not

prevent a mortgagor from curing the default and halting the

foreclosure prior to the entry of a written order confirming the

foreclosure sale.”      In re Parish, No. 10-00086, 2010 WL 1372387,

at *1 (Bankr. D. Haw. Apr. 6, 2010) (emphasis added); see also

Graf v. Hope Bldg. Corp., 171 N.E. 884 (N.Y. 1930) (Cardozo, J.,

dissenting) (“Equity declines to give effect to a covenant,

however formal, whereby in the making of a mortgage, the

mortgagor abjures and surrenders the privilege of

redemption.”). 36   Accordingly, our interpretation that HRS § 667-

5(c) provides a right to cure is directed by HRS § 667-5(c)’s

codification of the same right under the common law.            To hold
      36
            Federal law recognizes an equitable right of redemption and cure.
In re Parish, 2010 WL 1372387, at *1 (“The right of redemption is an
equitable interest that is included in the bankruptcy estate under section
541(a)(1).”).

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otherwise would be to disregard the emanating purpose of HRS

§ 667-5(c) and to indirectly nullify the common-law right to

cure as incorporated in HRS § 667-5(c). 37

 3.        The Santiagos Cured the Default, and Tanaka’s Nonjudicial
                         Foreclosure was Wrongful

              Based on the statutory right provided in HRS § 667-5,

the Santiagos had a right to cure the default occasioned by

their non-payment.      Thus, the circuit court’s conclusion of law

that there is no right to cure in Hawaiʻi law is incorrect.

              Although the Santiagos indicated on March 10, 2008,

that they were halting payment to the mortgage servicer based on

concerns regarding mediation, they were continuing to set aside

payment.      The record further indicates that the Santiagos cured

any event of default as of May 8, 2008, some four months prior

to the sale.

              Default is a necessary precondition for nonjudicial

foreclosure under HRS § 667-5.         Lee, 121 Hawaiʻi at 290, 218 P.3d

at 778 (“This section specifically requires breach of a

condition of the mortgage as a condition precedent to

      37
            Because the right to cure is grounded in the common law and has
existed even prior to the 2008 amendment to HRS § 667-5, the codification of
that right in HRS § 667-5, which became effective in June 2008, applies in
this case. Additionally, the circuit court’s citation to Weinberg v. Mauch,
78 Hawaiʻi 40, 52, 890 P.2d 277, 289 (1995), for the proposition that there is
no “right to cure” is incorrect. That case is inapposite because it did not
concern a statutory or common-law right to cure but only whether an
assignment of a right to cure was consented to in the contract.

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foreclosure.”)      Lee found that a sale pursuant to HRS § 667-5

was invalid where a breach of a mortgage contract had been cured

because, in that instance, the mortgagors “were no longer in

breach of a condition of the mortgage” and, thus, the mortgagee

“could not invoke the mortgage’s power of sale clause.”             Id. at

291, 218 P.3d at 779.       A foreclosure sale conducted when the

default had already been cured, according to Lee, “did not

comply with the requirements of HRS section 667–5 and was, thus,

invalid.”    Id. at 291, 218 P.3d at 779 (emphasis added).

            Accordingly, since Tanaka’s foreclosure was conducted

after the Santiagos had cured their default, the sale pursuant

to HRS § 667-5 was unlawful, and the circuit court’s conclusion

that Tanaka “complied with the applicable foreclosure statutes”

was incorrect. 38    It was also incorrect for the circuit court to

conclude that Tanaka was “entitled to a writ of ejectment.”

                       C.    The Santiagos’ Damages

            Where it is determined that the nonjudicial

foreclosure of a property is wrongful, the sale of the property

is invalid and voidable at the election of the mortgagor, who

     38
            The Santiagos argue that the circuit court should have granted
their Motion for Reconsideration because its decision “resulted in an over
$1.3 million cash forfeiture as a result of [the Santiagos’] purchase of the
subject property and their full performance” under the Mortgage. In light of
our disposition of this case, it is unnecessary to reach this argument.

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shall then regain title to and possession of the property.             See

Ulrich v. Sec. Inv. Co., 35 Haw. 158, 168 (1939) (holding that

where a self-dealing mortgagee fails to exercise its right to

non-judicial foreclosure in a manner that is fair, reasonably

diligent, and in good faith and to demonstrate that an adequate

price was procured for the property, the resulting sale is

void); Lee v. HSBC Bank USA, 121 Hawaiʻi 287, 292, 218 P.3d 775,

780 (2009) (concluding “that an agreement created at a

foreclosure sale conducted pursuant to HRS section 667–5 is void

and unenforceable where the foreclosure sale is invalid under

the statute”).    Voiding the foreclosure sale at this time,

however, has been rendered impracticable because the Tavern has

already been resold by Tanaka to a third party.          See 123 Am.

Jur. Proof of Facts 3d § 31 (2011) (“It has long been held that

if the property has passed into the hands of an innocent

purchaser for value, an action at law for damages is generally

the appropriate remedy.”).      Thus, based on our power to fashion

an equitable relief in foreclosure cases, see Beneficial Haw.,

Inc. v. Kida, 96 Hawaiʻi 289, 312, 30 P.3d 895, 918 (2001)

(reiterating that mortgage foreclosure is a proceeding equitable

in nature), we consider appropriate relief.

          Jenkins v. Wise, 58 Haw. 592, 574 P.2d 1337 (1978), is

instructive.   In that case, even though this court found the

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purchaser to be in default, we disapproved of the circuit

court’s disposition that essentially effectuated a total

forfeiture of the purchaser’s interest, in part because the

seller’s “security interests in the property were never in

jeopardy.”    Id. at 598, 574 P.2d at 1342.       In this context, the

court found that “where no injustice would thereby result to the

injured party, equity will generally favor compensation rather

than forfeiture against the offending party.”          Id. at 597, 574

P.2d at 1341.    Thus, instead of cancelling the purchase contract

and depriving the purchaser of the property and the significant

amount of money that she already paid, this court ordered the

purchaser of the property to pay the seller the entire unpaid

balance of the purchase price and accrued interests in exchange

for specific performance by the seller under the purchase

contract.    Id. at 604, 574 P.2d at 1345.

            Similar to Jenkins, Tanaka’s security interests in the

Tavern were never in jeopardy.       At the time of their ejectment,

the Santiagos had made virtually full payment to Tanaka for the

Tavern, including an $800,000 down payment and $585,161.60 in

mortgage payments.    Hence, we exercise our equitable power in

awarding restitution to the Santiagos so as to prevent

forfeiture of their interests.       Accordingly, we conclude that

the Santiagos are entitled to restitution of their proven out-

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of-pocket losses from Tanaka’s wrongful foreclosure of the

Mortgage and subsequent sale of the Tavern.           See Fleming v.

Napili Kai, Ltd., 50 Haw. 66, 70, 430 P.2d 316, 319 (1967)

(declaring that equity jurisprudence “is not bound by the strict

rules of the common law, but can mold its decrees to do justice

amid all the vicissitudes and intricacies of life” (quoting

Bowen v. Hockley, 71 F.2d 781, 786 (4th Cir. 1934)).            This

amount is equal to the undisputed $800,000 down payment that the

Santiagos paid for the Tavern, $585,161.60 in mortgage payments

from September 2006 to March 2011, consisting of principal,

interest, and fees, $17,518.31 that the Santiagos were required

to pay in closing charges associated with the sale, and

$10,110.88 in property taxes that the Santiagos paid after

Tanaka had wrongfully sold the Tavern back to herself. 39            In sum,

the Santiagos suffered total out-of-pocket losses of

$1,412,790.79 as a result of Tanaka’s wrongful foreclosure of

the Mortgage and subsequent sale of the Tavern. 40

      39
            The Santiagos suggested to both the circuit court and the ICA
that Tanaka’s “actual damages,” which they estimated at $80,335, should be
deducted from their gross damages. This deduction proceeded upon the premise
that the nonjudicial foreclosure was valid and that the purchase price at the
foreclosure sale would be $1.3 million. Because both assumptions are
incorrect, the proposed deduction is not applicable.
      40
            Relatedly, the Santiagos, who should have been the prevailing
parties as to Tanaka’s breach of mortgage and breach of note counterclaims,
are also entitled to attorneys’ fees they incurred at the circuit court. HRS
§ 607-14 (Supp. 1997). Conversely, because Tanaka should have been the

                                                              (continued. . .)
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            In cases involving fraud or deceit, which includes

nondisclosure claims, this court has previously stated that the

measure of damages “is usually confined to either the ‘out-of-

pocket’ loss or the ‘benefit of the bargain.’”           Ellis v.

Crockett, 51 Haw. 45, 53, 451 P.2d 814, 820 (1969); Zanakis-Pico

v. Cutter Dodge, Inc., 98 Hawaiʻi 309, 320, 47 P.3d 1222, 1233

(2002) (same).      Under the out-of-pocket rule, “the damages are

the difference between the actual value of the property received

and the price paid for the property, along with any special

damages naturally and proximately caused by the fraud prior to

its discovery, including expenses incurred in mitigating the

damages.”    B.F. Goodrich Co. v. Mesabi Tire Co., 430 N.W.2d 180,

182 (Minn. 1988); see generally 37 Am. Jur. 2d Fraud and Deceit

§ 434 (2013).      In contrast, the benefit-of-the-bargain rule

“allows the [recipient of the fraud or deceit] to recover the

difference between the value of the property received and the

value to plaintiff that the property would have had if the

representation had been true.”        Id.; see generally 37 Am. Jur.

(. . .continued)

losing party, the circuit court’s award of attorneys’ fees to her, based on
HRS § 607-14, is erroneous. We therefore remand this case to the circuit
court for a determination of the amount of attorneys’ fees due the Santiagos.

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2d Fraud and Deceit § 432 (2013). 41       It is unnecessary to decide

the applicable measure of nondisclosure damages due the

Santiagos because, based on the trial record, the total amount

of damages to which the Santiagos are entitled on their

nondisclosure claim is included within the $1,412,790.79 amount

that this court has already awarded to them.

            With respect to damages for negligent

misrepresentation, the Santiagos “may recover the pecuniary

losses caused by their justifiable reliance on a negligent

misrepresentation.”      Zanakis-Pico, 98 Hawaiʻi at 321, 47 P.3d at

1234 (citing State ex rel. Bronster v. U.S. Steel Corp., 82

Hawaiʻi 32, 919 P.2d 294 (1996) (recognizing that “pecuniary

losses are recoverable in a claim for negligent

misrepresentation”)); see Chun v. Park, 51 Haw. 462, 468, 462
P.2d 905, 909 (1969) (approving “out of pocket” expenses

incurred in connection with the purchase of a property in

reliance upon a negligent misrepresentation).           The Zanakis court

      41
            Inherent in the foregoing formulations is the presupposition that
the recipient of fraud or deceit retains some value as a result of the
transaction in which the fraud or deceit was made. Where the recipient of
fraud or deceit is left with no value whatsoever, the proper measure of
damages is “the amount . . . paid with interest from the date of payment,
plus incidental losses and expenses suffered as a result of the seller’s
misrepresentations.” Salmon v. Brookshire, 301 S.W.2d 48, 54 (Mo. Ct. App.
1957); accord Kerr v. Vatterott Educ. Ctrs., Inc., 439 S.W.3d 802, 813-14
(Mo. Ct. App. 2014); see Anderson v. Heasley, 148 P. 738 (Kan. 1915).

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adopted the following formulation from the Restatement (Second)

of Torts for damages recoverable for a negligent

misrepresentation:

          [T]hose damages necessary to compensate the plaintiff for
          the pecuniary loss to him or her of which the
          misrepresentation is a legal cause, including

          (a) the difference between the value of what he or she has
          received in the transaction and its purchase price or other
          value given for it; and

          (b) pecuniary loss suffered otherwise as a consequence of
          the plaintiff’s reliance upon the misrepresentation.

Zanakis-Pico, 98 Hawaiʻi at 322, 47 P.3d at 1235 (2002)

(alterations and emphasis omitted) (quoting Restatement (Second)

of Torts § 552B (1977)).       Although the Santiagos are entitled to

damages for negligent misrepresentation, similar to the damages

for nondisclosure, we need not decide the applicable amount due

the Santiagos because based on the trial record, the total

amount of damages to which the Santiagos are entitled on their

negligent misrepresentation claim is included within the

$1,412,790.79 amount that they have already been awarded.

                         VI.       Conclusion

          Based on the foregoing, we vacate the ICA Judgment on

Appeal and the circuit court’s Judgment, Writ of Ejectment,

Order Denying the Santiagos’ Motion for Reconsideration, and

Order Granting Tanaka’s Fees.       The circuit court’s Trial Order,

which incorporates the FOF and COL, is vacated insofar as it is

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inconsistent with this opinion; otherwise, it is affirmed.             The

case is remanded to the circuit court (1) for entry of judgment

in favor of the Santiagos on their negligent misrepresentation

and nondisclosure causes of action; (2) for entry of judgment in

favor of the Santiagos on Tanaka’s breach of note, breach of

mortgage, breach of covenant of good faith and fair dealing, and

ejectment causes of action; and (3) for determination of

interest, attorneys’ fees, and costs in favor of the Santiagos,

as appropriate.

Gary Victor Dubin and                    /s/ Mark E. Recktenwald
Frederick J. Arensmeyer
for petitioner                           /s/ Paula A. Nakayama

Robert Goldberg                          /s/ Sabrina S. McKenna
for respondent
                                         /s/ Richard W. Pollack

                                         /s/ Michael D. Wilson

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