[00:00:07] Speaker 03: Thank you. [00:00:07] Speaker 03: Please be seated. [00:00:08] Speaker 03: OK, our last case on calendar is Ryan versus Association of Apartment Owners of Waikiki Landmark 25-92. [00:00:19] Speaker 03: Each side has 15 minutes. [00:00:22] Speaker 04: We don't want you to think that your case is less important just because the audience left. [00:00:27] Speaker 04: It's just as important. [00:00:29] Speaker 01: Good morning. [00:00:30] Speaker 01: May it please the court. [00:00:31] Speaker 01: My name is Stephen Chung and I represent the plaintiff appellant Michael Thomas Ryan. [00:00:38] Speaker 01: I'd like to reserve five minutes of my time for rebuttal. [00:00:41] Speaker 01: This case arises under the court's diversity jurisdiction and involves state law claims and so therefore state substantive law should be applied. [00:00:50] Speaker 01: I intend to argue two points. [00:00:52] Speaker 01: The first point is that there is no statute of limitation that bars the claims in this action. [00:00:59] Speaker 01: And the second point is that if there is a statute of limitation that applies to the claims of this action, it should have been equitably told under the discovery rule or fraudulent concealment. [00:01:11] Speaker 01: So pursuant to [00:01:13] Speaker 01: Hancock versus Colana Partners, the Hawaii Supreme Court has ruled that a deed that is executed without authority is void ab initio. [00:01:24] Speaker 01: And the Supreme Court relied on the New York Court of Appeals case of Faison versus Lewis in adopting that rule. [00:01:31] Speaker 01: So we have two situations where deeds are void ab initio, a forged deed, because obviously the person executing the deed has no authority to convey the property. [00:01:43] Speaker 01: And you have a deed that is conveyed without authority, where the person executing the deed didn't have the authority to execute the deed, such as this case. [00:01:54] Speaker 01: This case arises where a condominium association that did not hold a power of sale, much less- Sorry, I thought the second example in Hancock was when someone signed something thinking it was something else. [00:02:07] Speaker 01: That's fraud. [00:02:08] Speaker 01: So there's two divisions. [00:02:11] Speaker 01: There's the fraud claims. [00:02:13] Speaker 01: And fraud can be a forgery, that's without authority, or it could be fraud that's induced, such as someone says, here, sign this document. [00:02:24] Speaker 01: It's a will. [00:02:26] Speaker 01: And it turns out to be a deed. [00:02:28] Speaker 01: So the person who signed the deed had authority to convey the title. [00:02:33] Speaker 01: That's fraud and the inducement. [00:02:35] Speaker 01: And so where you have a forged deed without authority, there is no statute of limitations that could make that deed valid. [00:02:42] Speaker 01: But where you have a deed that is fraudulently induced, title passes to the grantee. [00:02:48] Speaker 02: Counsel, how do we deal with Delapino, where the, I believe the Hawaii Supreme Court said that a wrongful foreclosure and violation of the power of sale is voidable? [00:03:02] Speaker 02: not void of an issue. [00:03:04] Speaker 02: And that was discussed approvingly in Malawi, correct? [00:03:09] Speaker 01: I'm sorry. [00:03:09] Speaker 02: Does the Supreme Court discuss Della Pina in Malawi also? [00:03:14] Speaker 01: Correct. [00:03:14] Speaker 01: Della Pina is easily distinguishable, because if you read what the Supreme Court says, it says a defective power of sale. [00:03:23] Speaker 01: A defective power of sale. [00:03:25] Speaker 01: The mortgagee holds the power of sale, has the authority to convey the property, but for some reason, [00:03:33] Speaker 01: execution of the power of sale is defective. [00:03:36] Speaker 01: They failed to give proper notice or they didn't give them sufficient number of days notice. [00:03:40] Speaker 01: But because the mortgage holds the power of sale, that conveyance document transfers title to the [00:03:48] Speaker 01: purchaser. [00:03:49] Speaker 01: And so in the de la Pena case, the Supreme Court says it used to be the law in Hawaii under Silva versus Lopez that a defective power of sale is void, void ab initio. [00:04:01] Speaker 01: But then the Supreme Court recognized that the modern trend is not to have those sales void because you've got an innocent third party that has obtained title, and that title is going to be forfeited if you declare that the conveyance is void. [00:04:17] Speaker 03: And isn't that true here too? [00:04:20] Speaker 01: Except that the association did not hold a power of sale. [00:04:23] Speaker 01: That's the major difference between power of sale cases and these cases where the association... Well, here it's a foreclosure, but they could have foreclosed. [00:04:31] Speaker 03: They just had to use a different procedure to do it, right? [00:04:34] Speaker 01: They had to go to court. [00:04:35] Speaker 03: Right. [00:04:35] Speaker 03: So they had the ability to foreclose. [00:04:37] Speaker 03: So why isn't that analogous? [00:04:39] Speaker 01: because they did not hold a power of sale. [00:04:41] Speaker 01: The statute that the association used, 6675, specifically required a mortgage containing a power of sale in order to use that process. [00:04:52] Speaker 01: Now the legislature had passed in 1999, [00:04:55] Speaker 01: a different process for condominium associations to use. [00:04:58] Speaker 01: And that was known as Part 2, HRS 667-21-42. [00:05:04] Speaker 01: And the legislature intended for condominium associations to use that process that contained numerous consumer safeguards. [00:05:12] Speaker 01: But the association, in this case, chose not to use that process. [00:05:16] Speaker 01: They used this 1874 statute, 6675, that requires a mortgage that contains a power of sale. [00:05:24] Speaker 01: And they did that in order to avoid the consumer safeguards. [00:05:28] Speaker 01: So that's how these cases arise. [00:05:31] Speaker 01: The association didn't use the statute that the legislature intended for them to use. [00:05:36] Speaker 01: That statute was defective, by the way, because in the Sakhal case, which was a part two, a nonjudicial foreclosure, the ICA said, we've read the statute. [00:05:47] Speaker 01: We've done a thorough investigation, an exhaustive search. [00:05:52] Speaker 01: And we cannot see where in the statute [00:05:54] Speaker 01: the legislature gave to the association a power of sale that they needed to use part two. [00:06:01] Speaker 01: So even though that's what the legislature may have intended, the legislature did not give to associations a power of sale. [00:06:09] Speaker 01: That's how the Malapi decision came about because the associations went to the legislature and they said, bail us out. [00:06:16] Speaker 01: We have all these cases where we're being sued for wrongful foreclosure, but you intended for us to be able to use a non-judicial foreclosure remedy, and you didn't intend that we had to have a power of sale. [00:06:30] Speaker 01: And the Supreme Court said, [00:06:33] Speaker 01: In that case, the district court, Judge Kobayashi, said that statute's unconstitutional because you're affecting contract rights. [00:06:41] Speaker 01: You're imposing new contract rights on these people who lost their homes when you use HRS 6675, which requires a more discontinuational power sale, and now you're trying to retroactively change the contract rights. [00:06:54] Speaker 01: The Supreme Court said, and I argued, it doesn't matter that [00:06:59] Speaker 01: The legislature is trying to retroactively provide to associations this power of sale, because the statute still doesn't give them a mortgage. [00:07:06] Speaker 01: You need a mortgage to use 6675, and the Hawaii Supreme Court agreed. [00:07:11] Speaker 01: And that's the holding of Malawi. [00:07:13] Speaker 01: It is not that you need a power of sale to do a 6675 foreclosure. [00:07:18] Speaker 01: That was established in Lee versus HSBC Bank in 2009, where the Supreme Court said there is no statute that grants a power of sale. [00:07:28] Speaker 01: It arises by contract. [00:07:30] Speaker 01: It can be in your bylaws of an association's bylaws, or it can be in a mortgage or some other contract. [00:07:36] Speaker 01: But you need a contractual power of sale to, I'm sorry, a power of sale arises from contract, not by statute. [00:07:45] Speaker 01: So that's where we are. [00:07:47] Speaker 01: Going back to the [00:07:49] Speaker 01: case with Hancock versus Kalana partners. [00:07:52] Speaker 01: So the deed that the association executed taking title and possession of this unit with the grantor and the grantee under the deed is just void, ab initio. [00:08:04] Speaker 01: And the Supreme Court relied on Faison. [00:08:07] Speaker 01: And the cases following Faison says, not only is the deed not subject to a statute of limitations, but a claim for damages is also not subject to a statute of limitations. [00:08:19] Speaker 03: So let's say we disagree with you and you need to show fraud. [00:08:22] Speaker 03: Can you get to your second argument? [00:08:25] Speaker 03: If you need to show fraud, how are you going to show it? [00:08:32] Speaker 01: Well, we don't need to show fraud because we show that the association doesn't have authority. [00:08:37] Speaker 01: If you don't have authority to convey title, your title is void. [00:08:42] Speaker 02: Right. [00:08:42] Speaker 02: But I think the question is, if we disagreed with you, just assuming we disagreed with you on the voidable versus voided argument, and that it's just voidable and the statute of limitations applies, how do you show fraud? [00:09:02] Speaker 01: We would have argued that the Supreme Court in the [00:09:07] Speaker 01: Namahoy case holds that a false certification that you complied with the statute to the foreclose constitutes fraud. [00:09:15] Speaker 01: And that's what we have in this case. [00:09:17] Speaker 01: After the association conveyed the property to itself, it filed an affidavit of foreclosure falsely certifying [00:09:24] Speaker 01: that it complied with 6675. [00:09:27] Speaker 01: Well that was impossible because they don't hold a mortgage. [00:09:30] Speaker 01: So the certification was false and under the Nam Ahoy case that's fraud. [00:09:34] Speaker 03: So there can be there can be a kind of misstatement where someone says I have the mortgage in front of me and it says X and then there can be another kind of statement that's as a legal matter the mortgage gives me the right to do something. [00:09:51] Speaker 03: I think you're trying to argue [00:09:53] Speaker 03: Well, or maybe you think the distinction doesn't matter. [00:09:56] Speaker 03: But I would have thought that fraud kind of needed to be a factual thing, like this is in the mortgage and I'm lying to you about what it says versus I have a legal interpretation. [00:10:06] Speaker 01: Right, that's fraud in the inducement. [00:10:07] Speaker 03: So I think we have more of a legal interpretation here, but can you tell me if I'm wrong about that? [00:10:13] Speaker 01: Yes, this is a legal interpretation. [00:10:14] Speaker 01: They don't even hold a mortgage. [00:10:16] Speaker 03: And so what case says that giving an incorrect legal interpretation can count as fraud in the concealment? [00:10:23] Speaker 01: Well, if you don't have the authority to convey a title, the document you signed is void ab initio. [00:10:29] Speaker 03: Well, that's your first argument. [00:10:30] Speaker 03: We're now saying, let's assume we disagree with you about that and you need to show fraudulent concealment. [00:10:36] Speaker 03: What case says that giving an incorrect legal theory counts as fraudulent concealment? [00:10:42] Speaker 01: as Hawaii Supreme Court in Malawi held as we pled in our complaint and we plead in all these complaints that the association fraudulently concealed the wrong that it was committing by misrepresenting that it held a power of sale, impliedly representing that it held a power of sale when it did not, or implicitly representing that it had the right to use 6675 when it did not. [00:11:06] Speaker 01: the Hawaii Supreme Court in Malawi held, that is sufficient for fraudulent consuming. [00:11:11] Speaker 01: And that's the substantive law. [00:11:12] Speaker 02: So the hard part there is that the Supreme Court in Malawi seemed to be relying very heavily on the difference between the pleading standards in state and federal court. [00:11:21] Speaker 02: And in federal court, we apply Hawaii's substantive law, but federal pleading standards, correct? [00:11:30] Speaker 01: That is correct. [00:11:31] Speaker 01: But I submit that the statement in Malawi is substantive law, not procedural. [00:11:36] Speaker 02: So and that's I've tried to see if there's something in the lobby that stands for the proposition that the legal misrepresentation. [00:11:48] Speaker 02: what you consider to be a legal misrepresentation counts as fraudulent concealment. [00:11:53] Speaker 02: And it's hard to read Mulabi that way, because there were, I mean, it's a little ambiguous. [00:11:58] Speaker 02: But I think the court was also referring to essentially allegations of misrepresentation that could have been factual or legal. [00:12:13] Speaker 02: One way at least to read Malawi would be that there was enough of a factual allegation, a factual misrepresentation to survive Hawaii pleading standards. [00:12:28] Speaker 01: You would have to look at that argument in the context of the Namahoy decision, where the Supreme Court clearly says that when you make a false certification that you've complied with the foreclosure statute and it's false, that is fraud. [00:12:43] Speaker 01: This is consumer protection. [00:12:44] Speaker 01: So when you do a non-judicial foreclosure, you're not in court. [00:12:48] Speaker 01: You're not before a judge in equity who is overseeing everything, like in the Santiago case, by the way. [00:12:54] Speaker 01: What you have is a creditor. [00:12:56] Speaker 01: who is acting like a trustee because supposedly you gave to them the authority to sell your property. [00:13:03] Speaker 01: And under the Condor v. Matsuyoshi case, the Hawaii Supreme Court reaffirmed Ulrich v. Security Investments [00:13:13] Speaker 01: that these creditors have fiduciary trustee-like duties to act fairly and in good faith and to tell the truth. [00:13:21] Speaker 01: And so we had the right, Mr. Ryan had the right when he received this notice by this association which has a fiduciary duty saying that we're going to do this to believe that they had the right to do that. [00:13:33] Speaker 02: So one of the footnotes in Malawi, they say they haven't answered the question of how far they extend Santiago. [00:13:40] Speaker 02: Is that correct? [00:13:41] Speaker 02: One of the footnotes in Malawi, the Hawaii Supreme Court says, we haven't decided yet how far to take Santiago, essentially, which is the fiduciary duty case. [00:13:53] Speaker 01: I think they were talking about the Santiago, the duty to tell the truth. [00:13:57] Speaker 01: Right. [00:13:57] Speaker 01: But Kanzar versus Matsuyoshi is a Supreme Court case, and it holds that creditors who are doing these out-of-court foreclosures have a trustee-like duty to act fairly and in good faith. [00:14:12] Speaker 03: Sorry, what is the name of that case? [00:14:13] Speaker 01: K-O-N-D-A-U-R versus Matsuyoshi M-A-T-S. [00:14:18] Speaker 04: Is that one you cited? [00:14:20] Speaker 01: Cited in my open brief. [00:14:22] Speaker 04: I wanted to just ask one question. [00:14:24] Speaker 04: Obviously, we're looking at both state law and federal law here. [00:14:29] Speaker 04: And we've got the Malabi case. [00:14:32] Speaker 04: But then you have, I guess, varying applications of that in the district court. [00:14:38] Speaker 04: here in the district of Hawaii. [00:14:40] Speaker 04: And so I'd ask you about Wetzel, both one and two, where I think that was the one case where a district court tried to explain what the contours of Malawi are and ask you why that isn't what's applicable here. [00:14:57] Speaker 01: errors that Judge Watson made in the Guetzo case. [00:15:01] Speaker 01: Number one is he hold that Malawi established the law that you needed a power of sale to do this 6.675 non-judicial foreclosure. [00:15:10] Speaker 01: That's not the case. [00:15:11] Speaker 01: That law was established at least in 2009 by Lee, reaffirmed by Santiago in 2015, and it arose from an 1874 statute. [00:15:21] Speaker 01: Malawi did not create the duty. [00:15:24] Speaker 01: Number two, the judge erroneously thought that the Ma lobbies upon receiving the notices went and sought legal assistance. [00:15:32] Speaker 01: That is not the case. [00:15:33] Speaker 01: There is nothing in the case that supports Judge Watson's [00:15:39] Speaker 01: assumption that the Malabbi sought legal assistance upon receiving this notice. [00:15:43] Speaker 01: The fact is that they waited almost six years until filing the lawsuit. [00:15:50] Speaker 01: So it shows that they also did not know that the association had no right to do what they did. [00:15:56] Speaker 01: In all these cases, [00:15:58] Speaker 01: The homeowners had no idea that they were injured by these associations that use 6675. [00:16:05] Speaker 01: They had no idea that they were injured and it was a result of wrongful misconduct on the part of associations. [00:16:10] Speaker 01: In contrast to all of the cases that just talk about the discovery rule and all the cases, especially those cases and the other cases, the plaintiffs knew that they were injured. [00:16:20] Speaker 01: They just didn't know the cause. [00:16:22] Speaker 01: In those cases, yes, they should have sought legal advice. [00:16:25] Speaker 01: But in our cases, these homeowners had no idea. [00:16:28] Speaker 01: They were in default. [00:16:29] Speaker 01: They knew that the association had collection rights. [00:16:32] Speaker 01: They knew that the associations had put liens on their units, and they could foreclose the liens. [00:16:38] Speaker 01: They had no idea that the manner in which the associations intended to do that was illegal. [00:16:45] Speaker 02: I want to clarify your position on the equitable tolling argument. [00:16:51] Speaker 02: Are you contending that Hawaii fraudulent concealment rule for equitable tolling generally would cover misrepresentation of law? [00:17:03] Speaker 02: Are you saying that in this particular case, where the AOAO was legally essentially had the duties of some kind of fiduciary duty or trustee-like duty, that in that situation, even a misrepresentation [00:17:21] Speaker 02: of law would count essentially. [00:17:24] Speaker 02: So this particular context, not as a matter generally of fraudulent concealment law. [00:17:30] Speaker 02: So it really turns on whether the AOAO had some greater duty in this instance to be clear about its power of sale. [00:17:42] Speaker 01: Pursuant to the Verminger case, their FIDU series with respect to the homeowners. [00:17:46] Speaker 01: Pursuant to Condor, they had a duty of good faith and fair dealing. [00:17:51] Speaker 01: Under Namahoy, they had a duty not to say, not to certify that they did everything properly when they did not. [00:17:59] Speaker 03: Okay, you're over your time. [00:18:01] Speaker 03: So we'll give you two minutes for rebuttal, but let's hear from the other side. [00:18:34] Speaker 00: Okay, good morning, if it is still morning. [00:18:37] Speaker 00: May it please the court, Maxwell Copper on behalf of Appellee, the Association of Apartment Owners of Waikiki Landmark. [00:18:45] Speaker 00: All of appellant's arguments, either in briefing or today, boil down to, I've divided into three, Mr. Chung, divided into two separate arguments challenging the district court's application of a statute of limitations. [00:18:58] Speaker 00: If I may begin with Mr. Chung's arguments regarding fraudulent concealment. [00:19:04] Speaker 00: As Judge McCowen pointed out, a similar issue was addressed in Wetzel, the US District Court case of Wetzel, as well as Malabay. [00:19:14] Speaker 00: And both Wetzel and Malabay very clearly distinguish between the pleading standards of state court and federal court. [00:19:22] Speaker 00: And in Malabay, when both the majority and the dissent are discussing the pleading standards, the majority decides that it was dispositive in that case. [00:19:34] Speaker 00: And so we need to look to the pleading standards and the analysis in federal court. [00:19:39] Speaker 00: The case of Hexel Corp.' [00:19:41] Speaker 00: 's Ineos Polymers states that a party must plead facts showing that defendant affirmatively misled it and that plaintiff had neither actual nor constructive knowledge of the facts. [00:19:52] Speaker 00: I think an important distinction, one that was pointed out by Judge Sung, is a distinction between a factual misstatement and a legal misstatement. [00:20:01] Speaker 00: What is important in fraudulent concealment is not concealment of the claim, but of the facts giving rise to the claim. [00:20:08] Speaker 00: So what is it that exactly appellants are alleging? [00:20:11] Speaker 00: In paragraph 26 of the first amended complaint, this is the paragraph that appellants point to as the paragraph pleading fraudulent concealment in their opening brief. [00:20:22] Speaker 00: Paragraph 26 points to the notice, the affidavit and notice of foreclosure of power of sale, which is in the record many times, but in ER 190. [00:20:34] Speaker 00: and is sort of screen-shotted into our answering brief. [00:20:39] Speaker 00: In that notice of association foreclosure under power of sale, the association states only that the foreclosure is being conducted pursuant to Section 514B146 and 667-5. [00:20:55] Speaker 00: Appellants use the term power of sale loosely and do not distinguish between a contractual power of sale and a statutory power of sale. [00:21:03] Speaker 00: In fact, in oral argument, Mr. Chung may go so far as to say there's no such thing as a statutory power of sale. [00:21:12] Speaker 00: However, under HR 667-40, a power of sale foreclosure under this part, I'm quoting here, may be used in certain non-mortgage situations where a law [00:21:23] Speaker 00: or a written document contains, authorizes, permits, provides for a power of say. [00:21:28] Speaker 02: Council, can I, sorry, I want to get to a question about how to read Malawi as, because it's not clear to me that they relied exclusively on the difference between the pleading standard and I'm looking at, I think it's [00:21:45] Speaker 02: either a very long footnote, I think 36, and where they say, among other things, that the Malawi's complaint pled that the AOAO had fraudulently concealed the wrongfulness of this foreclosure proceedings by implying, stating, and or misrepresenting that it held a mortgage with the power of sale when it did not. [00:22:06] Speaker 02: I'll skip ahead a little bit, and then they say, [00:22:09] Speaker 02: They relied on the false statements and representations of the AOAO concerning the AOAO's right to conduct a public sale pursuant to HRS, Section 665, and that they were entitled to so rely because they were members of the AOAO, because of the AOAO's trustee-like relationship with them, and because the AOAO was acting as an agent or attorney on their behalf. [00:22:33] Speaker 02: Based on our notice pleading standards, we therefore cannot say it appears beyond doubt that the Malabes can prove no set of facts. [00:22:40] Speaker 02: I mean, they seem to be at least leaving open the legal argument that the AOAO had this trustee-like relationship with them and had a legal duty to essentially be more forthcoming as your opposing counsel contends. [00:23:01] Speaker 02: So it's just while they're also referring to the pleading standard, if as a matter of law the AOAO did have some greater duty to be forthcoming, that seems to me then there would be a stronger argument for the tolling here as a matter of law and not something we could dismiss just based on the federal pleading standard. [00:23:29] Speaker 00: Well, Your Honor, I believe there is a reason why the Milabe Court included the federal pleading standard in that exact statement that you read. [00:23:37] Speaker 00: Because when we're looking at what's plausible versus what's possible in this situation, those are highly distinguishable, even if you add this heightened duty, which I believe the district court properly addressed here and found no heightened duty. [00:23:54] Speaker 00: But even if you add a height and duty, what you would need to find is that the association essentially concealed a statute and a statute that they cited to in their notice. [00:24:07] Speaker 00: So in that very notice, the association tells them we are doing a foreclosure, tells them what provision they're doing the foreclosure under, and it does not cite to a paper power of sale or a contractual power of sale. [00:24:20] Speaker 00: Also, [00:24:21] Speaker 00: Ryan had a copy or was entitled to a copy of the bylaws and the declaration, the governing documents, which is the only place a contractual power sale would be. [00:24:31] Speaker 00: So he would have knowledge of all of those facts. [00:24:36] Speaker 00: Appellant site to no case law that says this heightened standard totally throws out the analysis of the fraudulent concealment analysis. [00:24:45] Speaker 00: If anything, to me the heightened standard or this heightened duty goes to the elements of fraudulent concealment and what constitutes a reasonable investigation, which is one of the elements. [00:25:01] Speaker 00: What I would say, even if they're right, is that the duty to reasonably investigate or what's considered reasonable investigation would be lowered given this scenario. [00:25:12] Speaker 00: But here, investigation was not needed at all because they had right in front of them what statute the association was citing to, what statute they were claiming the authority under. [00:25:23] Speaker 00: Again, HRS 667-40 tells us that you can have, in some circumstances, a statutory power of sale, not just a contractual power of sale. [00:25:37] Speaker 00: So the association truly believed, or the association put forth that it had this statutory power of sale. [00:25:47] Speaker 00: In order to constitute fraud, [00:25:50] Speaker 00: without getting into a factual analysis. [00:25:52] Speaker 00: It has to be plausible that the association knew at the time that its interpretation of 514B146 was false. [00:26:03] Speaker 00: And it had to hide, well for fraudulent concealment, it had to hide that. [00:26:07] Speaker 00: Again, it cannot hide a statue. [00:26:10] Speaker 00: And two, if we look at the context during which time the statement was made back in 2010, pre-Mulabe, what we have is, as Ryan points out in their reply, they state very clearly that [00:26:29] Speaker 00: Given the long-standing interpretation by Hawaii condominium attorneys was that condominium associations were authorized to use HRS 667-5, it would have been futile for Ryan to seek legal advice. [00:26:43] Speaker 00: Ryan admits that it was the long-standing position of the condominium attorneys in the state to hold as such, to agree with the association's interpretation that HRS 514B146 granted this power. [00:26:57] Speaker 00: Furthermore, the trial court judge in Malabé actually agreed with the association's interpretation, as did two Supreme Court justices in the dissent in Malabé, including Chief Justice Recktenwald. [00:27:11] Speaker 02: I just want to make sure I understand you correctly. [00:27:13] Speaker 02: Essentially, it would be that the equitable tolling, fraudulent concealment couldn't apply because essentially there was a good faith reliance on legal [00:27:24] Speaker 02: predominant legal views that the AOAO did in fact have the power of sale. [00:27:30] Speaker 02: That couldn't have been an intentional misrepresent, knowing misrepresentation. [00:27:34] Speaker 00: I would say that it was, it's not plausible, under the facts pled, it is not plausible that the association could take that position. [00:27:43] Speaker 00: Or that the association would have knowledge that Chief Justice Recktenwald and Judge Nishimura did not have. [00:27:53] Speaker 00: If I may move briefly to the void ab initio arguments. [00:28:02] Speaker 03: Sorry, can I just make a clarifying question about this? [00:28:05] Speaker 03: So it sounds like you think, because of what you just said, it's not plausible that the association sort of intentionally misled here. [00:28:16] Speaker 03: You think that is the answer, regardless of whether there was a heightened duty? [00:28:20] Speaker 03: I was going to ask you about this Condor case that [00:28:22] Speaker 03: cited by your opponent, but you think that just is irrelevant because even if there's a heightened duty, they still thought that they were doing something valid. [00:28:30] Speaker 03: Is that basically your argument? [00:28:32] Speaker 00: One of the arguments, I would say that the arguments I stated to Judge Sung just now, I think are overarching through any type of fraud alleged, right? [00:28:45] Speaker 00: Because we are talking about several different types of fraud, whether it be fraudulent concealment, fraudulent misrepresentation, or the two types of fraud in the Hancock case. [00:28:54] Speaker 00: But my analysis of the possible heightened duty, again, goes back to the concealment side of fraudulent concealment and what constitutes concealment. [00:29:08] Speaker 00: And in Hexall, it states that you cannot have fraud or that if plaintiff had actual or constructive knowledge of the facts, the doctrine of fraudulent concealment does not apply. [00:29:21] Speaker 00: So even with this heightened standard, they still had knowledge, either actual or constructed, of these facts. [00:29:28] Speaker 00: They knew which statute we were doing. [00:29:30] Speaker 00: We were doing the foreclosure under. [00:29:32] Speaker 00: They knew that a foreclosure was happening. [00:29:34] Speaker 00: And again, this association never claimed the paper of power of sale. [00:29:39] Speaker 00: So even with this heightened standard, one, you do not have fraud in my arguments addressed to Judge Sung. [00:29:45] Speaker 00: And two, you don't have concealment because they had knowledge of the facts. [00:29:52] Speaker 00: Again, moving briefly to the void ab initio arguments. [00:29:56] Speaker 00: I seem to read Hancock very differently than Mr. Chung, respectfully. [00:30:01] Speaker 00: In Hancock, they pointed to two types of fraud, right? [00:30:05] Speaker 00: I believe there was a brief discussion. [00:30:07] Speaker 00: The fraudulent signature of forgery, which does not apply here. [00:30:12] Speaker 00: And then we have [00:30:16] Speaker 00: Fraud in the factum, which they define as tricking you into signing a document you don't know. [00:30:23] Speaker 00: You're signing like when you trick your mom into signing off on the bad grades of your report card by telling her it's something else. [00:30:30] Speaker 00: That is not what we have here. [00:30:32] Speaker 00: And what is interesting about Hancock is they go even further than that. [00:30:36] Speaker 00: They talk about why these two types of fraud render a devoid ab initio. [00:30:41] Speaker 00: It is because these types of fraud go to the formation and they use the phrase nature of the document. [00:30:48] Speaker 00: So the actual creation, the signature, the execution, the creation of the document itself. [00:30:54] Speaker 00: Even in the footnote that the district court uses to address the void of initial arguments, the district court states that the type of fraud alleged appears, if there is fraud, to be fraudulent inducement and not these two types of fraud. [00:31:11] Speaker 00: And Hancock specifically points out that there is a statute of limitations for fraudulent inducement. [00:31:16] Speaker 00: I would also like to briefly put on the record the association's objection to the void ab initio arguments. [00:31:24] Speaker 00: As the district court points out in that footnote, these arguments were not properly raised in the court below. [00:31:30] Speaker 00: They were raised for the first time in a supplemental brief that was ruled by the court to be out of order. [00:31:37] Speaker 00: The association did not have the opportunity to address this issue below because it was raised out of order. [00:31:43] Speaker 00: The district court chose to address the issue in a footnote. [00:31:46] Speaker 03: But again the association did not have the opportunity to address it in the court below you've had the ability to address it now So I'm not sure that using forfeiture makes a lot of sense at this point. [00:31:56] Speaker 00: Maybe we should just resolve this issue Your honor, I'd leave that to you three. [00:32:01] Speaker 00: I just wanted to state for the record our objection But you think you win on the merits of that anyway [00:32:09] Speaker 00: Yes, I think Hancock versus Kulana Partners is extremely clear on that. [00:32:14] Speaker 00: And then there was discussion as well about Delapinia, which has the same case law as the Santiago v. Tanaka case. [00:32:23] Speaker 00: Santiago v. Tanaka states very clearly [00:32:26] Speaker 00: where it is determined that the non-judicial foreclosure of a property is wrongful, sale of the property is invalid and voidable at the election of the mortgager. [00:32:34] Speaker 00: So while Mr. Chung argues that there is a distinction between Santiago and this case, that distinction would have to come in the form of fraud or a separate cause of action. [00:32:45] Speaker 00: Because Santiago very clearly states that the cause of action of just plain old wrongful foreclosure renders a deed voidable and not void. [00:32:53] Speaker 00: So we would have to look to avoid ab initio arguments, which again Hancock claims to have done or purports to have done a survey of cases and has only come up with these two types of fraud. [00:33:07] Speaker 00: There are no further questions. [00:33:08] Speaker 00: I thank you for your time. [00:33:10] Speaker 03: Thank you. [00:33:11] Speaker 00: Thank you. [00:33:12] Speaker 03: Let's put two minutes on the clock for a bottle, please. [00:33:19] Speaker 01: Thank you. [00:33:19] Speaker 01: I'll try to be quick and try to respond to all the points. [00:33:22] Speaker 01: Santiago is an outlier, and the Supreme Court, in a subsequent decision, more recent decision, recognized that it was the court's equitable jurisdiction. [00:33:32] Speaker 01: So a mortgage foreclosure is equitable in nature. [00:33:35] Speaker 01: And in Santiago, the property had been foreclosed by a mortgagee that did not hold a power of sale, but the property was then sold to a third party, BST. [00:33:45] Speaker 01: And the Supreme Court held that [00:33:48] Speaker 01: exercising our equitable jurisdiction, we're going to allow that sale to stand and not allow the purchaser to forfeit or not require the purchaser to forfeit. [00:33:58] Speaker 01: It's an outlier. [00:33:59] Speaker 01: It's the only case where the Supreme Court talks about a voidable sale which is done without authority and that is an outlier. [00:34:10] Speaker 01: Without my learning counsel, just avoids the issue in [00:34:15] Speaker 01: Hancock versus Kalana partners that there are two types of deeds where there is no, where the deed avoid ab initio. [00:34:27] Speaker 01: He talks about the fraudulent conveyance and the fraud [00:34:30] Speaker 01: forgery, but he ignores the fact that the Supreme Court also recognizes that a deed conveyed without authority is also void of an issue, and that is what we're arguing. [00:34:41] Speaker 01: The Association did not have a power sale, it is a deed without authority, which the Supreme Court recognized in the Lanes case, L-L-A-N-E-S, that [00:34:51] Speaker 01: these defective power of sale cases where mortgages hold power of sale are treated differently from a sale without authority and that's what we're dealing with here, a sale without authority. [00:35:04] Speaker 01: The Council suggests that 66740 provides a [00:35:09] Speaker 01: Statutory power sale, that is totally wrong. [00:35:13] Speaker 01: The Supreme Court in Sakhal and the ICA in Sakhal held that there is no statute that creates a power of sale. [00:35:20] Speaker 01: There's not such thing as a statutory power of sale. [00:35:24] Speaker 03: And if you... Okay, I'm going to need to... We gave you extra time, but you've now used it up, so I think I need to wrap up. [00:35:31] Speaker 01: Thank you. [00:35:32] Speaker 03: Thank you both sides for the helpful arguments. [00:35:34] Speaker 03: This case is submitted and we are adjourned for the day.