City Bank v. Saje Ventures II, Z-R

• Decision Date: 14 January 1988
• Docket Number: No. 11985,Z-R,11985
• Citation: 7 Haw.App. 130,748 P.2d 812
• Parties: CITY BANK, Plaintiff-Appellee, v. SAJE VENTURES II, Edwin Y. Fujinaga, Andrea Fujinaga, Saul Tanzman, Joy Tanzman, ASF, Inc., a Hawaii corporation, SJT, Incorporated, a Hawaii corporation, CHO Enterprises, Limited, a Hawaii corporation, Domain Corporation, a Hawaii corporation, and Inter-Time Joint Venture, a Hawaii general partnership, Defendants-Appellants, and William K.M. CHEE, Trustee in Bankruptcy for Waikiki Hobron Associates, Charles Pankow Associates, Rizalino R. Vicente, Director of Finance, City and County of Honolulu,Corporation, a Hawaii corporation, John Does 1-50, Jane Does 1- 50, Doe Partnerships 1-50, Doe Corporations 1-50, Doe Entities 1-50, and Doe Governmental Units 1-50, Defendants, and Charles Pankow Associates, Defendant Cross-Claimant, v. Rizalino R. VICENTE, Director of Finance, City and County of Honolulu, John Roes 1-10 and Roe Partnerships, Corporations, Governmental Units and Other Units 1-20, Additional Cross-Claim Defendants, and Philip John Cascavilla, Intervenor.
• Court: Hawaii Court of Appeals

Page 812

748 P.2d 812

7 Haw.App. 130

CITY BANK, Plaintiff-Appellee, v. SAJE VENTURES II, Edwin Y. Fujinaga, Andrea Fujinaga, Saul

Tanzman, Joy Tanzman, ASF, Inc., a Hawaii corporation, SJT,

Incorporated, a Hawaii corporation, CHO Enterprises,

Limited, a Hawaii corporation, Domain Corporation, a Hawaii

corporation, and Inter-Time Joint Venture, a Hawaii general

partnership, Defendants-Appellants, and

William K.M. CHEE, Trustee in Bankruptcy for Waikiki Hobron

Associates, Charles Pankow Associates, Rizalino R. Vicente,

Director of Finance, City and County of Honolulu, Z-R

Corporation, a Hawaii corporation, John Does 1-50, Jane Does

1- 50, Doe Partnerships 1-50, Doe Corporations 1-50, Doe

Entities 1-50, and Doe Governmental Units 1-50, Defendants, and Charles Pankow Associates, Defendant Cross-Claimant, v. Rizalino R. VICENTE, Director of Finance, City and County of

Honolulu, John Roes 1-10 and Roe Partnerships,

Corporations, Governmental Units and

Other Units 1-20, Additional

Cross-Claim Defendants,

and

Philip John Cascavilla, Intervenor.

No. 11985.

Intermediate Court of Appeals of Hawai'i.

Jan. 14, 1988.

Syllabus by the Court

1. As a general rule, the right of a good faith purchaser to receive property acquired at a judicial sale cannot be affected by the reversal of an order ratifying the sale where a supersedeas bond has not been filed. Exceptions to this rule are where the reversal is based on jurisdictional grounds and where the purchaser is the mortgagee.

2. If the reviewing court can no longer grant effective relief, the case is moot and the appeal will be dismissed.

3. Where the lower court confirmed the foreclosure sale of the mortgaged real property to a third party good faith purchaser, and where defendants failed to stay the enforcement of the confirmation order and the sale has been closed, the appeal is moot and subject to dismissal since the appellate court could not direct a new sale of the property even if it were to reverse the confirmation order.

4. An appellate court is not obligated to consider an issue raised for the first time on appeal. It will deviate from this rule only when justice so requires.

Mary Blaine Johnston (Boyce R. Brown, Jr. with her on briefs; Brown, Johnston & Day, of counsel), Honolulu, for defendants-appellants.

John A. Chanin (Dennis W. Jung with him on brief; Law Offices of John A. Chanin, of counsel), Honolulu, for plaintiff-appellee.

Before HEEN, Acting C.J., TANAKA, J., and Circuit Judge RONALD B. GREIG, in place of BURNS, C.J., Recused.

TANAKA, Judge.

This is a mortgage foreclosure action in which defendant-mortgagor Saje Ventures II (Saje), a general partnership, its general partners, the guarantors, and others (collectively the Saje Defendants) ¹ appeal from the order confirming the commissioner's (Commissioner) public auction sale of the land and a multi-story condominium building thereon in Waikiki (the Property) to Outrigger Hotels Hawaii (Outrigger) for $24,000,000. Claiming irregularities in the Commissioner's sale, the Saje Defendants ask this court to reverse the circuit court's confirmation order and to "remand the case with instructions that the lower court order a new sale[.]" Since the Saje Defendants did not stay the effect of the confirmation order and since there has been a closing of the sale of the Property to Outrigger which cannot be undone under the facts and the law, we cannot grant the relief sought by the Saje Defendants. Therefore, the appeal is moot and must be dismissed.

I.

On January 31, 1983, plaintiff City Bank loaned Saje $35,000,000 which was secured by a mortgage covering the Property. On February 26, 1985, City Bank filed a complaint to foreclose the mortgage. Approximately a month later Saje filed an answer "admit[ting] the allegations contained in the complaint." On September 6, 1985, the circuit court granted summary judgment in favor of City Bank and a junior mortgagee ² and issued a foreclosure decree appointing a commissioner to sell the Property at public auction without an upset price.

The Commissioner held the auction on August 15, 1986. There were two bids of which Outrigger's $24,000,000 was the highest. Ten days later City Bank moved to confirm the sale. The Saje Defendants opposed City Bank's motion on grounds that (1) the Commissioner violated his duty to obtain the highest possible purchase price for the Property, (2) City Bank improperly interfered with the foreclosure sale, and (3) the highest bid at the auction was "grossly inadequate."

After a hearing held on the motion, the circuit court on November 26, 1986, entered its order confirming the sale and directing distribution of the proceeds. Six days later the Commissioner closed the transaction with Outrigger. ³ On December 8, 1986, the Saje Defendants filed a motion for reconsideration of the November 26, 1986 order. After the denial of their motion on January 13, 1987, the Saje Defendants timely appealed. ⁴

II.

The general rule is that the right of a good faith purchaser "to receive property acquired at a judicial sale cannot be affected by the reversal of an order ratifying the sale where a [supersedeas] bond has not been filed[.]" Leisure Campground & Country Club Ltd. Partnership v. Leisure Estates, 280 Md. 220, 223, 372 A.2d 595, 598 (1977). See also Citibank, N.A. v. Data Lease Fin. Corp., 645 F.2d 333, 336 (5th Cir.1981). The purpose of the rule is to advance "the stability and productiveness of judicial sales[.]" 47 Am.Jur.2d Judicial Sales § 55 (1969). An exception to the rule is where the reversal is based on jurisdictional grounds. Id. at § 54. The second exception is where the purchaser is the mortgagee since he "does not free himself from the underlying dispute to which he is a party[.]" Leisure Campground, 280 Md. at 223, 372 A.2d at 598. See also 47 Am.Jur.2d Judicial Sales §§ 59-61.

In this case, the purchaser of the Property was Outrigger, a third party not involved in the case. There is nothing in the record to indicate that Outrigger was not a good faith purchaser. There was no stay of the execution of the confirmation order and the sale of the Property has been closed. The grounds upon which the Saje Defendants seek reversal of the confirmation order are not jurisdictional in nature. Thus, even if this court were to reverse the circuit court's confirmation order, the reversal would not affect the closed sale to Outrigger.

III.

The United States Supreme Court has stated that when "an event occurs which renders it impossible for [an appellate] court, if it should decide the case in favor of the [appellant], to grant him any effectual relief whatever, the court will not proceed to a formal judgment, but will dismiss the appeal." Mills v. Green, 159 U.S. 651, 653, 16 S.Ct. 132, 133, 40 L.Ed. 293, 294 (1895). As succinctly put by another court, "[a] case is moot if the reviewing court can no longer grant effective relief." United States v. Oregon, 718 F.2d 299, 302 (9th Cir.1983).

Here, the Saje Defendants did not file a supersedeas bond to stay the enforcement of the November 26, 1986 confirmation order. Therefore, as discussed above, even if we were to reverse the confirmation order, the closed sale of the Property to Outrigger could not be vitiated and we could not direct a new sale of the Property as requested by the Saje Defendants. Consequently, the appeal is moot and subject to dismissal. See United States v. Wylie, 730 F.2d 1401 (11th Cir.1984); Schaaf v. S.S. North American, 368 F.2d 925 (3d Cir.1966); Edwards v. Hanna Lumber Co., 415 P.2d 980 (Okla.1966).

The Saje Defendants argue for the first time in their reply brief that the Commissioner's violation of Hawaii Rules of Civil Procedure (HRCP) Rule 62(a) ⁵ precluded them from "being able to decide whether to post a bond pending their appeal." This argument, however, is without merit under the circumstances of this case.

For purposes of this discussion we will assume that the closing of the sale to Outrigger only six days after the filing of the confirmation order violated Rule 62(a). That error, however, did not prevent the Saje Defendants from deciding whether to proceed (1) under HRCP Rule 62(b) by filing a post-judgment motion and obtaining a stay of the enforcement of the confirmation order or (2) under HRCP Rule 62(d) by filing a notice of appeal and giving a supersedeas bond. See United States v. One 1962 Ford Galaxie Sedan, 41 F.R.D. 156 (S.D.N.Y.1966). The Saje Defendants opted to file a motion for reconsideration under HRCP Rule 59.

The motion for reconsideration, even if it had been filed prior to the closing of the sale, would not of itself have stayed enforcement of the confirmation order. See 11 ...