Adair v. Hustace, 6589

• Court: Supreme Court of Hawai'i
• Writing for the Court: Before RICHARDSON, C. J., LUM and NAKAMURA, JJ., and OGATA and MENOR; RICHARDSON
• Citation: 64 Haw. 314,640 P.2d 294
• Parties: Carl C. ADAIR, Successor Trustee in Dissolution of Kona Corporation, a Dissolved Hawaii Corporation, Plaintiff, v. Edward C. HUSTACE, Trustee, et al., Defendants. Hannah REEVES, et al., Defendants, Cross-Claimants, Appellants, Cross-Appellees, v. FOOTHILL LAND CORPORATION, et al., Defendants, Cross-Defendants, Appellees, Cross-Appellants, and Edward C. Hustace, Trustee, Defendant, Appellee.
• Docket Number: No. 6589,6589
• Decision Date: 09 February 1982

Page 294

640 P.2d 294

64 Haw. 314

Carl C. ADAIR, Successor Trustee in Dissolution of Kona

Corporation, a Dissolved Hawaii Corporation, Plaintiff, v. Edward C. HUSTACE, Trustee, et al., Defendants.

Hannah REEVES, et al., Defendants, Cross-Claimants, Appellants, Cross-Appellees, v. FOOTHILL LAND CORPORATION, et al., Defendants, Cross-Defendants, Appellees, Cross-Appellants, and Edward C. Hustace, Trustee, Defendant, Appellee.

No. 6589.

Supreme Court of Hawai'i.

Feb. 9, 1982.

Reconsideration Denied Mar. 9, 1982.

Syllabus by the Court

1. An action to cancel a deed for fraud may be maintained against a bona fide purchaser if the alleged fraud is fraud in the factum, but not if it is fraud in the inducement.

2. Fraud in the factum is fraud which goes to the nature of the document itself.

3. Fraud in the inducement is fraud which induces the transaction by misrepresentation of motivating factors such as value, extent, usefulness, age or other characteristic of the subject of the transaction.

4. The doctrine of laches reflects the equitable maxim that equity aids the vigilant, not those who slumber on their rights.

5. Where applicable, laches bars a court from considering an equitable action because it is more equitable to defendants and important to society to promote claimant diligence, discourage delay and prevent the enforcement of stale claims.

6. The components of laches are unreasonable delay by plaintiff in bringing a claim, and resulting prejudice to defendant.

7. Delay is reasonable if a claim is brought without undue delay after plaintiff knew of the wrong or knew of facts and circumstances sufficient to impute such knowledge.

8. Examples of prejudice to defendant from plaintiff's unreasonable delay sufficient to invoke the doctrine of laches include loss of evidence with which to contest plaintiff's claims, including the fading memories or deaths of material witnesses, changes in the value of the subject matter, changes in defendant's position, and intervening rights of third parties.

9. A major difference between the statute of limitations and laches is the flexibility of the latter; in the former case the question of diligence in bringing suit is determined by the words of the statute, while in the latter case it is determined by the circumstances of each particular case.

10. The doctrine of laches may preclude an equitable action brought within the period specified by an applicable statute of limitations.

11. It is not a prerequisite to operation of laches that a plaintiff have actual knowledge of a claim; he only need have knowledge of facts and circumstances sufficient to impute knowledge of a claim.

12. Where the basis of a claim is breach of a confidential relationship, the fact that the parties stood in a confidential or fiduciary relationship to one another normally appears to make knowledge of a claim by one against the other less easily imputable than if such a relationship did not exist.

13. Because the nature of a claim for fraud is defendant's denial to plaintiff of knowledge of the claim, knowledge of a fraud claim is normally less easily imputable to plaintiff than is knowledge of other claims.

14. Laches may preclude an action to cancel a deed for fraud under appropriate circumstances.

15. Instructions are adequate if, taken as a whole, they correctly declare applicable law; technically correct instructions are not required so long as a party could not have suffered prejudice on their account.

16. A jury verdict will not be reversed on appeal if it is supported by substantial evidence.

Lawrence W. Cohn, Kailua-Kona, for defendants, cross-claimants, appellants, cross-appellees Hannah Reeves, et al.

Paul A. Lynch and William W. L. Yuen, Honolulu (Case, Kay, Clause & Lynch, Honolulu, of counsel), for defendants, cross-defendants, appellees, cross-appellants Foothill Land Corp., et al.

Michael W. Gibson, Honolulu (Ashford & Wriston, Honolulu, of counsel), for defendant, appellee Edward C. Hustace.

Before RICHARDSON, C. J., LUM and NAKAMURA, JJ., and OGATA and MENOR, Retired Justices, assigned by reason of vacancies.

RICHARDSON, Chief Justice.

These are appeals of final judgment on a cross-claim to cancel a deed. Cross-claimants allege that the deed was procured from the grantor, their ancestor, by the fraud of cross-defendants' predecessor-in-title. In a special verdict on written interrogatories, a jury found that the deed was procured by fraud, but that cross-claimants' action was barred by the statute of limitations, laches, estoppel and adverse possession. Judgment was entered for cross-defendants, from which judgment both parties appeal. We affirm.

I.

In 1936, Elizabeth P. Solomon owned a 79.89-acre parcel of land in Awalua-Ohiki, District of North Kona, County of Hawaii. Solomon's family had owned the parcel since the original land patent grant in 1915. They had not resided on the land, but had homesteaded it for various periods each year.

The parcel is located in an area long ranched by Huehue Ranch. In the late 1920s and early 1930s, a series of earthquakes and a fire changed the character of the parcel to low quality ranchland and made it accessible to grazing by cattle of that ranch.

Solomon's daughter, Mary Dunaway, testified that in 1935 Akina Ahana, Solomon's mother and then owner of the parcel, went to see Arthur J. Stillman about leasing the land to the ranch for cattle grazing. Stillman was married to Aileen Maguire, then sole income beneficiary of a testamentary trust created by the will of her grandfather, John A. Maguire, the corpus of which trust consisted largely of the ranch.

According to Dunaway, at that meeting Ahana and Stillman entered into an oral lease of the property for six months for $100. The lease was to be embodied in writing at a later date.

Ahana died in December 1935. Dunaway testified that just prior to Ahana's death, Ahana told Solomon that if Solomon chose to continue the lease, she should get it in writing.

In July 1936, Dunaway further testified, Solomon and her husband, Thomas, signed what they thought was a continuing lease of the property to Stillman and/or Huehue Ranch at $100/six months. The document was in fact a deed of the property from the Solomons to the John A. Maguire Estate Ltd. ¹ The consideration recited was $100. ² There is no dispute that the signatures on the deed are those of Elizabeth and Thomas Solomon. The deed was witnessed by Stillman and a notary public. Both Solomons, Stillman and the notary public are deceased. The deed was recorded in 1941.

Record title to the parcel devolved thereafter from the John A. Maguire Estate, Ltd. through others to the present owners of the ranch, who are the primary cross-defendants here. They are stipulated to be bona fide purchasers with respect to cross-claimants' claim.

Since 1936, the ranch has used the parcel as part of a larger area of about 600 acres for minimal cattle grazing. Improvements have consisted of some fencing, clearing and weed poisoning, and construction of a small holding pen.

No lease rent has ever been paid to Solomon and/or her heirs by Stillman and/or Huehue Ranch. No demand for such rent or any other claim regarding the land has ever been made by Solomon and/or her descendants. There has been no communication concerning the parcel between the respective parties or between their successors since 1936. There is no evidence that Ahana, Solomon or any of their heirs have used the property since at least 1935.

State tax records reflect that real property taxes on the property were paid by "Akina Ahana" through 1941. (Ahana having died in 1935, the taxes were actually paid by Solomon.) Since 1941, the year in which the 1936 conveyance was recorded, taxes have been paid by the respective record title holders. Dunaway testified that in 1945 Solomon told her that the tax bill on the property had stopped coming. She responded: "I just told her ... maybe it will keep on coming. You know. Because if you've been paying taxes for awhile, I think it will keep on coming ... sometimes taxes are like that." She testified that she was suspicious because the bill had stopped coming, but didn't follow through because of an unwillingness to interfere with her mother's affairs. Dunaway was, however, aware of the real property tax scheme because she had had property tax problems of her own.

Solomon died in 1955. One of Solomon's sons testified that family members discussed at that time "what was left, or what she had." However, there is no testimony that the status of the parcel was discussed then, despite the fact that Solomon had earlier told at least one family member of her belief that she continued to own the parcel.

Another of Solomon's sons, Herman Kunewa, was appointed administrator of Solomon's estate in 1965. In his October 1967 estate inventory, he did not list the parcel as an asset. When asked why not, he testified that while his mother had once, in 1945, told him of what she believed to be her ownership of the property, he did not find any deeds or other proof of such ownership and had forgotten the conversation by the time of the inventory. He did not consult with any family member in preparing the inventory.

On December 2, 1974, Carl C. Adair, as trustee in dissolution of the Kona Corporation, a dissolved Hawaii corporation, brought an action to quiet title to Huehue Ranch. On June 13, 1975, the trial court dismissed the complaint in toto under principles of res judicata. ³ No appeal therefrom was taken. Prior to such dismissal, Adair published notice of the action in a newspaper of general circulation in the County of Hawaii. The notice included a list of affected parcels by tax map key number, location description, patent grant number and acreage.

Hannah Reeves, Elizabeth Solomon's granddaughter, testified that she read the notice and recognized the listing of the parcel in question because of its acreage and location. She...