76 Hawai'i 39, Kuhnert v. Allison

• Decision Date: 25 February 1994
• Docket Number: No. 16607,16607
• Citation: 868 P.2d 457
• Parties: 76 Hawai'i 39 Heinz W. KUHNERT and Sherilyn Marie Kuhnert, Plaintiffs-Appellants, v. Clyde W. ALLISON and Darlene M. Osterman, Defendants-Appellees, and Libbie & Company, Inc., a Hawaii corporation, Marion Libbie Kamisugi, Herbert David Osterman, John Doe 1-5, Doe Corporation 1-5, Doe Partnership 1-5, and Doe Governmental Entity 1-5, Defendants, and State of Hawaii, Real Estate Commission, Respondent-Appellee.
• Court: Hawaii Supreme Court

Page 457

868 P.2d 457

76 Hawai'i 39

Heinz W. KUHNERT and Sherilyn Marie Kuhnert, Plaintiffs-Appellants, v. Clyde W. ALLISON and Darlene M. Osterman Defendants-Appellees, and Libbie & Company, Inc., a Hawaii corporation, Marion Libbie Kamisugi, Herbert David Osterman John Doe 1-5, Doe Corporation 1-5, Doe Partnership 1-5, and Doe Governmental Entity 1-5, Defendants, and State of Hawaii, Real Estate Commission, Respondent-Appellee.

No. 16607.

Supreme Court of Hawai'i.

Feb. 25, 1994.

Syllabus by the Court

1. Hawai'i Revised Statutes (HRS) § 467-18 (1985 and Supp.1992) requires that the Real Estate Commission be notified in writing of the commencement of an action at the time the action is commenced.

2. A failure to comply with the notification requirements in HRS § 467-18 constitutes a waiver.

3. HRS § 467-18 is a remedial statute and must be construed liberally in order to accomplish the purpose for which it was intended.

4. The purpose of HRS § 467-18 was to provide the Real Estate Commission with notice of a complaint such that default judgments against the Real Estate Recovery Fund could be avoided.

5. This court's foremost obligation in construing a statute is to ascertain and give effect to the intention of the legislature, obtained primarily from the language of the statute.

6. Statutory language must be read in the context of the statute as a whole and construed in a manner consistent with its purpose.

7. Where the language is plain and unambiguous, our only duty is to give effect to the statute's plain and obvious meaning.

8. The purpose of the Real Estate Recovery Fund is to protect the public by providing

a fund that will satisfy unpaid judgments against real estate brokers and salespersons.

9. Punitive damages constitute an exception to the compensatory aspect of the damages concept and, therefore, does not compensate for "injuries" sustained.

10. The Real Estate Recovery Fund was not intended to provide financial protection for unpaid judgments for punitive damages against real estate brokers and salespersons.

Ronald G.S. Au, Honolulu (Connie G.W. Meredith and Gerald H. Kurashima, with him on the briefs), for plaintiffs-appellants.

Sidney K. Ayabe, Honolulu (Rodney S. Nishida, with him on the briefs; of Libkuman, Ventura, Ayabe, Chong & Nishimoto), for defendants-appellees.

Before LEVINSON, Acting C.J., and NAKAYAMA and RAMIL, JJ., Circuit Court Judge MILKS, in place of MOON, C.J., recused, and Circuit Court Judge BLONDIN, in place of KLEIN, J., recused.

RAMIL, Justice.

Plaintiffs-Appellants Heinz and Sherilyn Kuhnert (Kuhnerts) were awarded compensatory and punitive damages in a real estate fraud case. The Kuhnerts are now attempting to collect their punitive damages from the Real Estate Recovery Fund (RERF). Respondent-Appellee State of Hawaii, Real Estate Commission (Commission) contends that the RERF does not provide for the recovery of punitive damages. In the alternative, the Commission argues that the Kuhnerts failed to comply with the statutory requirements that would entitle them to recover. The circuit court denied the Kuhnerts' request to recover punitive damages from the RERF. We affirm.

I. Facts

In 1983, the Kuhnerts listed their Nu'uanu home for sale with Libbie & Company, a real estate firm, whose principal and broker was Marion Kamisugi (Kamisugi). The listing agent of the Kuhnerts' home was Clyde Allison (Allison). Allison was also the vice-president of Libbie & Company.

Eventually, the Kuhnerts entered into a Deposit Receipt Offer & Acceptance (DROA) and a sale with Darlene and Herbert Osterman (Ostermans), pursuant to which the Kuhnerts received cash and the Ostermans' condominium. When the condominium's inflated value was discovered, the Kuhnerts filed suit.

On July 31, 1987, the Kuhnerts filed a complaint based upon fraud against the Ostermans, Allison, Kamisugi and Libbie & Company (collectively Defendants). The Kuhnerts alleged that Mrs. Osterman was a licensed real estate agent and that the Ostermans, Allison, Kamisugi and Libbie & Company knew that the value of the condominium was inflated and that the transaction constituted an intentional fraud. The Kuhnerts sought compensatory and punitive damages.

Pursuant to Hawai'i Revised Statutes (HRS) § 467-18(a) (1985), ¹ the Kuhnerts notified the Commission on July 31, 1987 that they had commenced a civil action that could result in collection from the RERF. Thereafter, on August 10, 1987, Gary Young (Young), the RERF's counsel, wrote to the Kuhnerts' attorney and asked that copies of all pleadings be served on him.

The circuit court dismissed the Kuhnerts' complaint on October 7, 1988, on the grounds that the Kuhnerts had not timely served Defendants with the complaint. This order was not served on Young and was not obtained by the Commission until September 2, 1992.

The Kuhnerts filed a second complaint against Defendants on October 13, 1988. The Commission was not notified of the second complaint.

After trial in May 1990, the jury returned a verdict in favor of the Kuhnerts and against all Defendants, awarding the Kuhnerts both compensatory and punitive damages. On a motion for new trial, the circuit court remitted portions of both the compensatory and punitive damages and granted a new trial in the event that the Kuhnerts did not accept the remittitur. The Kuhnerts accepted the remittitur, but Defendants filed a notice of appeal. This court affirmed the judgment of the circuit court.

Since this court's affirmation of the circuit court judgment, the Kuhnerts have been unable to collect the punitive damages awarded against Allison and Mrs. Osterman--$200,000 and $125,000, respectively. On August 28, 1992, the Kuhnerts filed a motion for an order directing payment from the RERF for the punitive damages assessed against Allison and Mrs. Osterman. The Commission opposed the motion, which the circuit court denied on October 21, 1992. The Kuhnerts filed this appeal on November 9, 1992, contending that the denial of their motion was in error.

II. Discussion

A.

Before we address the merits of this appeal, we first address the Commission's contention that the Kuhnerts are barred from collecting from the RERF because they did not inform the Commission of the commencement of the second lawsuit. ² Specifically, the Commission alleges two errors in violation of HRS § 467-18: (1)³ the second complaint was filed more than two years after the accrual of the cause of action; and (2) the Commission was not served with notice of the second complaint. ⁴

1.

HRS § 467-18 prescribes that an action resulting in an order for collection from the RERF must be filed within two years from the accrual of the cause of action.

HRS § 467-18 is clear and unambiguous. Myers v. Beatty, 70 Haw. 536, 538, 777 P.2d 709, 710 (1989) (appellants waived the right to recover from the RERF, where notice of the commencement of an action was given eight months after the action had been commenced). "There is nothing in the legislative history to indicate that the legislature did not mean what it said when it required the Commission to be notified in writing of the commencement of the action at the time the action was commenced, nor is there anything to indicate that the legislature did not mean that a failure to comply with that requirement would constitute a waiver under HRS § 467-23." Id. at 538, 777 P.2d at 710. Thus, the remaining question is the date the Kuhnerts' cause of action accrued.

HRS § 467-16 (Supp.1992) is a remedial statute and must be construed liberally in order to accomplish the purpose for which it was intended. Flores v. United Air Lines, Inc., 70 Haw. 1, 12, 757 P.2d 641, 647 (1988) (remedial statutes are those which provide a remedy or improve or facilitate remedies already in existence for the enforcement of rights and the redress of injuries).

Here, the Kuhnerts' cause of action accrued at the time of sale of the condominium. The sale of the condominium established the damages sustained by the Kuhnerts as a result of the fraud. Thus, the Kuhnerts' cause of action did not accrue until 1987, when they sold the condominium, and, therefore, the second complaint filed in October 1988 was timely. 2.

The Commission also argues that the Kuhnerts failed to notify it of the dismissal of the first complaint and of the filing of the second complaint. The Commission has not alleged that it was prejudiced in any way by these failures. It does, however, argue that HRS Chapter 467 should be strictly construed.

Clearly, the Commission was properly notified of the first complaint. Thus, the issue in the present case is whether the Kuhnerts were required under HRS § 467-18 to notify the Commission of the second complaint.

The purpose of HRS § 467-18 was to provide the Commission with notice of a complaint such that default judgments would be avoided. According to the legislative history, the Commission must be served with the pleadings "to protect against the problem of party defendants defaulting and causing a resulting recovery from the Fund without a court hearing." Hse.Stand.Comm.Rep. No. 393-72, in 1972 House Journal, at 813.

Here, the Commission was properly served with notice of the first complaint and suffered no prejudice when the Kuhnerts failed to notify it of the second complaint. The outcome of the Kuhnerts' second complaint would not have differed had the Commission been notified of the second complaint. The Commission was well aware that the Kuhnerts had a cause of action pending against Defendants which could result in a collection from the RERF, and, as noted, was not apprised that the first complaint had been dismissed until September 2, 1992. Accordingly, from the Commission's perspective, the second complaint was the functional equivalent of the first.

As for the Defendants, they provided a vigorous defense against the Kuhnerts' claims. Because the purpose of HRS § 467-18 was to provide notice to the...