84 Hawai'i 360, W.H. Shipman, Ltd., Application of, 16494
| Citation | 934 P.2d 1 |
| Decision Date | 28 February 1997 |
| Docket Number | No. 16494,16494 |
| Parties | 84 Hawai'i 360, 97-1 USTC P 50,288 In the Matter of the Application of W. H. SHIPMAN, LTD. |
| Court | Hawaii Court of Appeals |
William J. Wynhoff (Gerson, Grekin & Wynhoff, of counsel), on the briefs, Honolulu, for respondents-appellants.
Sandra Pechter Schutte (Roehrig, Roehrig, Wilson, Hara, Schutte & De Silva, of counsel), on the brief, Hilo, for petitioners-appellees.
Before ACOBA and KIRIMITSU, JJ., and Circuit Judge WATANABE in Place of Burns, C.J., Recused.
We hold in this appeal from the award of title by the land court (the court) to Petitioners-Appellees Roland Hideo Higashi, Clifton Kenichi Tsuji, Kenneth Kenichi Tanaka, and Howard Jitsuo Mimaki, purchasers at a United States Internal Revenue Service (IRS) real property tax sale under 26 U.S.C. § 6337(b) (1988) () that the court erred in ruling that the attempt by the owner, Respondent-Appellant, Shizuko Yamamoto (Yamamoto), to redeem the subject property from the Purchasers was invalid. Consequently, we conclude that Yamamoto's redemption was valid and reverse the court's September 2, 1992 judgment which cancelled Certificate of Title No. 331690 issued to Respondent-Appellant Hanalea, Inc. (Hanalea), Yamamoto's successor-in-interest, and ordered the issuance of a new certificate of title for the subject property to the Purchasers.
The following relevant facts were stipulated to by the parties at the May 8, 1992 hearing before the court. 1
On July 25 and August 31, 1988, the IRS recorded tax liens, pursuant to 26 U.S.C. § 6321, 2 against Yamamoto 3 in the Hawai'i Bureau of Conveyances. 4 Because the taxes remained unpaid, on February 21, 1988, Yamamoto's property was seized by the IRS through a written notice of seizure. 5 The property consists of "39.258 acres of unimproved real property located at TMK 3114, parcel 5, lot number 54" located at Kea'au, Puna, on the island of Hawai'i. The assessed value of the property in 1988 was $23,988.
The IRS's notice of sealed bid sale for the property, seizure no. 99-11-89-18, advertised a minimum bid price of $12,000 for the property. The notice stated that the property was seized from Yamamoto for nonpayment of taxes. The notice also quoted that portion of the Internal Revenue Code, 26 U.S.C. § 6337, which provides for redemption rights in the owner of the property being sold at a tax sale.
On March 15, 1989, the sealed bid sale was held. Clarence Ching, the president of Hanalea, submitted a bid of $15,000. Roland Hideo Higashi (Higashi), on behalf of Purchasers, 6 submitted the highest bid, $18,000. The Purchasers paid this amount, pursuant to 26 U.S.C. § 6338(a), and received a certificate of sale (certificate) in return. The certificate included a notice to the Purchasers of the owner's redemption rights. The notice, which set forth 26 U.S.C. § 6337(b), stated:
Redemption Rights
The rights of redemption of real estate after sale, as specified in Code 6337(b), are quoted below:
(b) Redemption of Real Estate After Sale.
(1) Period.--The owners of any real property sold as provided in section 6335, their heirs, executors, or administrators, or any person having any interest therein, or a lien thereon, or any person in their behalf, shall be permitted to redeem the property sold, or any particular tract of such property, at any time within 180 days after the sale thereof.
(2) Price.--Such property or tract shall be permitted to be redeemed upon payment to the purchaser, or in case he [or she] cannot be found in the county in which the property to be redeemed is situated, then to the Secretary, for the use of the purchaser, his [or her] heirs, or assigns, the amount paid by such purchaser and interest thereon at the rate of 20 percent per annum.
(Emphases added.)
On June 29, 1989, Yamamoto received instructions from Rebecca Nadler (Nadler) of the IRS regarding the procedures for redemption of the property. Nadler instructed Yamamoto that she "should inform the IRS if the property is redeemed," including "the date the property was redeemed, the amount paid in order to redeem the property and to whom the funds were paid."
Subsequent to the purchase of the property, Higashi received a letter dated June 30, 1989 from Alfred Y.K. Au (Au). The letter included a receipt form and a cashier's check for $19,070 and stated that the cashier's check was for redemption of Yamamoto's property. This check represented the bid price plus the twenty percent interest earned on the bid price from the time of the purchase to the redemption. The parties do not dispute that the redemption, if valid, was timely made and the tendered amount correct.
The letterhead of the June 30, 1989 letter identified Au as a certified public accountant and included Au's address and telephone number. The letter stated:
Gentlemen:
Enclosed, please find the following:
1. First Hawaiian Cashier Check for $19,070.00 in full Redemption of Seizure Number 99-11-89-18, Sealed Bid Sale of SHIZUKO YAMAMOTO'S Puna Property TMK (3) 1-1-4-5, on March 15, 1989.
2. Receipt for the above payment to be executed and returned by you to Shixuko [sic] Yamamoto and/or Hanalea, Inc.
3. A self-addressed envelope for your convenience in returning Receipt, Certificate of Sale, and other papers and documents.
Your prompt attention to this matter will be appreciated.
(Emphasis added.) The letter was signed by Au. The receipt form included with the letter stated:
RECEIPT
Received from SHIZUKO YAMAMOTO and/or HANALEA, Inc. the sum of Nineteen Thousand, Seventy Dollars and no/100--(19,070.00) for the redemption of her property. TMK (3) 1-1-4-5.
(Emphasis added.)
On July 5, 1989, Yamamoto filed a deed with the court conveying the property to Hanalea. The deed reserved to Yamamoto "the exclusive non-transferable right to FIFTY PERCENT (50%) of the net profit to be derived from the operation, lease or other disposition and/or sale of said property." Hanalea was issued land court Certificate of Title No. 331690 to the property.
In response to Nadler's June 29, 1989 letter, Yamamoto wrote a letter dated July 25, 1989 to inform the IRS that (1) the property was redeemed on June 30, 1989; (2) Higashi was paid by cashier's check in the amount of $19,070; and (3) the payment was mailed by "Restricted Delivery." Attached to this letter was a copy of the "return receipt." At the bottom of the letter, Yamamoto stated,
On the day after the redemption period expired and over two months after Au wrote Purchasers, Purchasers sent a letter dated September 12, 1989 through their attorney to Au. The letter stated that "[Purchasers] are rejecting your purported redemption of the subject property" and returned the cashier's check for $19,070. Purchasers explained that they were rejecting the redemption because they were not provided with "any verification" that Au had an interest in the land or was acting on behalf of Yamamoto. In response, Au wrote a letter dated September 15, 1989 to Purchasers' attorney informing him that Nadler "proctored" the redemption. Au also referred to Yamamoto's July 25, 1989 letter to Nadler where Yamamoto indicated that Au was her CPA. 7 Au pointed out further "that [he] ha[d] expended much time locating [Purchasers] to explain the redemption provisions which is always part of foreclosure sales of real property."
On October 18, 1989, the district director for the IRS issued a deed for the property to Purchasers. The deed stated that "more than 180 days have elapsed from the date of sale and the date of issuance of [the] Certificate of Sale" to Purchasers. 8
On December 19, 1989, Higashi filed a petition pursuant to HRS §§ 501-144 and 501-191 9 seeking to have the court registrar cancel Hanalea's Certificate of Title No. 331690 and issue a new certificate of title pursuant to the IRS deed dated October 18, 1989. HRS § 501-144 (1993) states in relevant part:
New certificate after enforcement of lien; tax sale. After registered land has been sold on any execution, or taken or sold for the enforcement of any lien of any description, the person claiming under an execution or under any deed or other instrument made in the course of proceedings to levy the execution or enforce any lien, may petition the court for the entry of a new certificate to the person, and the application may be granted....
The hearing on Purchasers' petition occurred on May 8, 1992. The court heard testimony from Clifford Kaminaka (Kaminaka), Nadler, Higashi, Au and Yamamoto.
Kaminaka worked for the IRS in Hilo as a collection officer. His duties included the seizure and sale of property. Kaminaka testified that a title search of the subject property did not reveal that either Au or Hanalea had an interest. Kaminaka also described the process for arriving at the minimum bid price and the information provided to potential bidders regarding the property. Information provided potential bidders included a list of encumbrances, the notice of sale, and an explanation of the bid procedure and of the taxpayer's redemption rights. Kaminaka related that five bids were received and that the Hanalea bid was $15,322. Kaminaka stated that it is his standard procedure to make an announcement of the amounts of the bids only and not to name the parties making bids. However, he did not specifically remember what he did at the auction involved. Kaminaka acknowledged that he issued Higashi a certificate of sale which stated Higashi was the successful bidder and that the property had been purchased for $18,000.
Nadler testified that she handled the file for the property involved in this case. Purchasers' counsel questioned Nadler about the procedure for dealing with seized property sold in a tax sale as follows Q. Okay. What about after the sale, what...
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