Background
This was the second appeal involving a Keaʻau property. MCH Sub I, LLC succeeded earlier parties after a prior nonjudicial foreclosure and ejectment action. On remand, an amended complaint sought declarations concerning the earlier foreclosure and, if appropriate, judicial foreclosure.
The circuit court had voided the earlier nonjudicial foreclosure because Citi Property Holdings’ default notice was improper, while reserving the judicial-foreclosure claim. In June 2024, MCH sent a default notice to the homeowners’ counsel, then moved for summary judgment on the judicial-foreclosure claim. The circuit court granted the motion and entered a foreclosure judgment.
The Court’s Holding
The Intermediate Court of Appeals vacated the summary-judgment order and foreclosure judgment. Paragraph 22 of the mortgage required notice to the borrowers before acceleration. Because the 2017 amended complaint sought the entire debt and a deficiency judgment, it accelerated a mortgage that otherwise would not mature until 2037.
MCH’s 2024 default notice was therefore too late: the required notice had to precede the operative complaint. The court rejected the homeowners’ separate argument that notice could not be delivered through their attorney, concluding that counsel was the homeowners’ agent and that service on counsel complied with Hawaiʻi Rule of Civil Procedure 5. The court did not reach the remaining standing, note-enforcement, and document-trustworthiness arguments.
Key Takeaways
- A foreclosure complaint seeking the full debt can constitute acceleration.
- When the mortgage requires pre-acceleration notice, notice sent after the operative complaint does not satisfy that condition precedent.
- In pending litigation, delivery of the notice to represented borrowers’ counsel can comply with the mortgage and Rule 5.
Why It Matters
The decision reinforces that mortgage notice-and-cure provisions must be satisfied before acceleration and foreclosure litigation. A later notice cannot cure the failure to provide contractually required notice before filing the operative foreclosure complaint.