Background
The Tautuas purchased a home in Ewa Villages, a master-planned community in ‘Ewa Beach, O’ahu, in 1996 through the City and County of Honolulu’s Shared Appreciation or Equity Program, which allowed buyers to purchase at roughly 75% of fair market value in exchange for sharing future appreciation with the City. In 2000, the Tautuas applied to construct a six-foot chain link and concrete block wall around their property; the Association’s Design Review Committee denied the application for failing to meet Design Standards and the Declaration of Covenants, Conditions, and Restrictions (DCCR). Despite the denial, the Tautuas built the wall before February 2009. Between 2009 and 2013, the Association sent nineteen violation notices and assessed $2,600.00 in fines, all of which went unpaid.
In 2015, the circuit court ordered the Tautuas to remove all non-compliant portions of the wall within fourteen days and entered a $2,600.00 judgment for unpaid fines plus $8,986.31 in attorneys’ fees and costs. The Tautuas paid the monetary judgment but never removed the wall. In July 2020, the Association hired a contractor for $7,853.40 to bring the wall into compliance, a cost the Tautuas refused to reimburse. In November 2020, the Association filed a foreclosure action under HRS § 421J-10.5 to recover approximately $18,949.96 in outstanding assessments, repair reimbursement, fees, and costs. The circuit court granted summary judgment and an interlocutory decree of foreclosure, which a prior appeal affirmed.
The Property was sold at commissioner’s sale in May 2023 to the Association — the sole bidder — for $1.00, while the Property carried a mortgage balance of approximately $362,398.02 and a City SAE lien of approximately $190,635.02, against a market value of $790,000–$810,000. The Tautuas had refused to allow open houses or interior inspections. After the circuit court ordered supplemental briefing and reopened bidding, the Association submitted a winning bid of $15,000.00. The circuit court confirmed the sale, found the Tautuas owed $11,498.21 to the Association (excluding attorneys’ fees), and awarded the Association $67,280.34 in attorneys’ fees and costs. The Tautuas appealed.
The Court’s Holding
The Hawaii Intermediate Court of Appeals affirmed both the confirmation of the foreclosure sale and the attorneys’ fee award, holding that the circuit court did not abuse its equitable discretion on either issue. On the sale price, the court applied the standard that a court should refuse to confirm a foreclosure sale only if the highest bid is “so grossly inadequate as to shock the conscience.” Given that the $15,000.00 bid was subject to senior liens totaling $553,033.04, the forced nature of foreclosure sales commonly depresses prices below fair market value, and the Tautuas themselves had impeded marketing by refusing open houses and interior inspections, the court could not say the price shocked the conscience.
On attorneys’ fees, the court noted that HRS § 421J-10 expressly entitles a planned community association to “all costs and expenses, including reasonable attorneys’ fees” incurred in collecting delinquent assessments, foreclosing a lien, or enforcing association documents, with the court tasked with determining reasonableness. The Tautuas challenged only the fee-to-collection-amount ratio, not the billing records or the lodestar calculation itself. The court declined to find an abuse of discretion based solely on the fees ($67,280.34) exceeding the underlying collection amount ($11,498.21), reasoning that the statute permits all reasonable fees regardless of proportionality to the debt collected.
Key Takeaways
- A foreclosure sale price will not be set aside merely because it is far below market value; Hawaii courts confirm a sale unless the price is so grossly inadequate as to shock the conscience, a bar that accounts for senior liens, forced-sale dynamics, and any obstruction by the homeowner.
- Homeowners who refuse to allow open houses or property inspections during a commissioner’s sale undermine their own ability to challenge a low sale price on appeal.
- Under HRS § 421J-10, a planned community association may recover attorneys’ fees that substantially exceed the underlying debt; proportionality to the amount collected is not a standalone basis for finding the fees unreasonable.
- Challenges to evidentiary admissibility must be supported by argument identifying the specific admissibility defect or the point is waived under Hawaii Rules of Appellate Procedure Rule 28(b)(7).
Why It Matters
This decision clarifies the scope of homeowner associations’ foreclosure rights and fee-recovery powers in Hawaii planned communities. It confirms that an HOA may foreclose even when homeowners are current on their mortgage, so long as they are delinquent on association-enforceable obligations, and that the fees the HOA incurs in multi-year litigation to enforce its CC&Rs are fully recoverable without being capped at the amount of the underlying debt.
The opinion also serves as a practical warning to homeowners resisting HOA enforcement actions: conduct that impedes a commissioner’s ability to market property — such as blocking open houses and inspections — will weigh against them if they later argue the sale price was unconscionably low. The case illustrates how the interaction of senior mortgage liens, SAE program encumbrances, and a foreclosure-market discount can result in a nominal bid price on a property with significant equity, yet still survive judicial scrutiny.