Adair v. Kona Corp.

• Decision Date: 19 March 1969
• Docket Number: No. 4603,4603
• Citation: 452 P.2d 449,51 Haw. 104
• Parties: , 51 Haw. 140 Carl C. ADAIR v. KONA CORPORATION, a Hawaii corporation, and Edward C. Hustace, Trustee of the Stillman Trust.
• Court: Hawaii Supreme Court

Page 449

452 P.2d 449

51 Haw. 104, 51 Haw. 140

Carl C. ADAIR v. KONA CORPORATION, a Hawaii corporation, and Edward C Hustace, Trustee of the Stillman Trust.

No. 4603.

Supreme Court of Hawai'i.

March 19, 1969.

Rehearing Denied April 28, 1969.

Syllabus by the Court

1. Quare, whether foreclosure by entry and possession under R.L.H.1955, §§ 336-10 through 336-12, is valid in the light of S.L.H.1939, c. 255, compiled in R.L.H.1955, § 196-1, which espouses the lien theory of mortgages.

2. A condition is a limitation, and does not create an obligation, nonperformance of which would constitute default.

3. A reserved roadway easement may be a floating one at the time of reservation, to be later fixed along a specific course at the time of construction of the roadway.

4. Where an easement is not definitely located in a grant or a reservation, and the dominant and servient owners fail to agree, a court may locate it in the exercise of its equity powers.

5. A mortgagor's right to release may be asserted by his privy where the mortgage provides that the benefits accruing to the mortgagor thereunder inure to the benefit of his assigns.

6. In case foreclosure is by court proceedings, a disputed question, such as a mortgagor's right to release, is determined in such proceedings.

7. In this case, the mortgagor, or his privy not having had any opportunity to assert the right to release in connection with foreclosure because the foreclosure was by entry and possession, asserted such right in the trial of the case, and the circuit court did no more than what it would have done in foreclosure proceedings had the mortgagee proceeded to foreclose by court action.

Clinton R. Ashford and J. M. Rolls, Jr., Honolulu, for appellant (Ashford & Wriston, Honolulu, of counsel).

Frank D. Gibson, Jr., Honolulu, for appellees (Henshaw, Conroy & Hamilton, Honolulu, of counsel).

Before RICHARDSON, C. J., and MARUMOTO and ABE, JJ., Circuit Judge Lum in place of Levinson, J., disqualified, and Circuit Judge MASATO DOI assigned by reason of vacancy.

MARUMOTO, Justice.

This is an appeal by Edward C. Hustace, trustee of Stillman Trust, from a judgment entered on May 27, 1966, by the circuit court of the first circuit in favor of Carl C. Adair in an action brought by Adair, as plaintiff, against Hustace and Kona Corporation, as defendants. The judgment was entered pursuant to an order granting Adair's motion for summary judgment and denying a like motion filed by Hustace.

In his action, Adair sought a conveyance of 200 acres of fee simple land in Kaloko, North Kona, Hawaii, by Kona Corporation to him, in accordance with their agreement calling for such conveyance. Inasmuch as this land was part of a larger parcel covered by a mortgage from Kona Corporation to Hustace, Adair also sought its release from the lien of the mortgage.

Adair filed his complaint on March 18, 1963, being the day on which Kona Corporation was legally required to pay the first installment of principal and interest on its promissory note secured by the mortgage. The note provided for the payment of such installment of principal and interest on March 17, 1963, but that day being Sunday, the due date was automatically extended to the following day under R.L.H.1955, § 197-85.

Kona Corporation suffered the mortgage to fall into default by failing to make the required payment on the due date. So, while the action was pending in the circuit court, Hustace proceeded to foreclose the mortgage by entry and possession as provided in R.L.H.1955, §§ 336-10 through 336-12. He made the entry on October 2, 1963, and filed the prescribed certificate of entry on October 8, 1963. The foreclosure was completed by the filing of affidavit of foreclosure on March 11, 1965.

In the judgment, the circuit court ordered Hustace to convey to Adair the land sought by him, subject to reservation of easements for the operation and maintenance of existing water tanks and water pipelines, and excepting therefrom land required for access to the remaining lands included in the foreclosure.

The pleadings, admissions, and affidavits on file in this case contain the following material and undisputed facts:

(1) On July 9, 1962, Hustace sold to Kona Corporation 49 parcels of fee simple lands in North Kona, containing an aggregate area of 15,740 acres, plus other items of real and personal property, for a total price of $6,000,000.

(2) Kona Corporation paid the price in the following manner: $500,000 in cash, and $5,500,000 by execution of a promissory note secured by purchase money mortgage.

(3) The sale followed a prior agreement of Hustace to sell the same property for the same price to Adair, subject to court approval, and court authorization to Adair to substitute a corporation to be formed by him and others as purchaser in his stead.

(4) The promissory note provided for payment of $5,500,000 in 14 equal annual installments of $367,000 each, beginning March 17, 1963, and a final installment of $362,000 on March 17, 1976, ¹ and carried interest on declining principal balances at the rate of 3 per cent per year for the first 10 years and 5 per cent per year thereafter, payable annually with each installment of principal.

(5) The mortgage contained a provision for foreclosure by any of the methods provided by law in case of mortgagor's default; and a covenant on the part of the mortgagee, set forth in paragraph (A) of the mortgagee's covenants, that he would 'release up to 300 acres of the land of Kaloko mauka of the Hawaii Belt Road, within tax keys 7-3-01-1 and 7-3-08-33, 37 and 38,' upon mortgagor's request, without payment of any consideration other than the down payment of $500,000, but subject to the conditions stated in paragraphs (J) and (K).

(6) Paragraph (J) provided that all releases be in blocks containing not less than 100 contiguous acres and be according to a plan or plans previously approved by the mortgagee to the end and purpose that the location and configuration of any released land would not make a patchwork or otherwise detrimentally affect the utility or value of the unreleased lands.

(7) Paragraph (K) provided that there be retained over any released land, as subject to the lien of the mortgage, easements for water tanks and water pipelines, and a roadway easement, determined by the mortgagee to be adequate and along reasonably traversable grades or contours, to provide access to the lands not yet released.

(8) The mortgage also contained a provision, set forth in paragraph (L) of the mortgagee's covenants, which required, as a condition precedent to any release, that the mortgagor not be in default under it or the promissory note secured thereby.

(9) On July 17, 1962, Kona Corporation executed an agreement with Adair in which, among other matters, it agreed to convey to Adair 200 acres of land 'in the area known as UPPER KALOKO, being the land situate mauka of the Hawaii County Belt Road, and below the 2800 foot elevation,' subject to easements for water and utilities and a roadway easement 100 feet in width for access to its remaining lands from the belt road.

(10) On March 14, 1963, counsel for Kona Corporation presented to Hustace's counsel a request for release of 264.639 acres of the land within tax key 7-3-01-1, together with a draft of release which described the parcel to be released by metes and bounds, and reserved easements for water tanks and water pipelines in their existing location and 'at such other location to which said water pipeline and tanks may be moved and relocated,' and a roadway easement 100 feet wide over the entire parcel, with the following explanation regarding the reservation of roadway easement: 'I have specifically provided, as a reservation subject to the lien of the mortgage, an easement for roadway and utilities 100 feet in a width across the entire 264 acres. At such time as a roadway is constructed across this property, the blanket easement could then be restricted to this roadway, but until such time as the road is constructed, there is a blanket easement over all of the property, which should be ample protection to the mortgagee.' ²

(11) On the same day, counsel for Hustace responded to the request, voicing some concern over the quoted language in the draft of release which made the reservation of easements for water tanks and water pipelines applicable to such facilities not only at their existing location but also as they might be relocated in the future, and objecting to the reservation of roadway easement in the draft on the ground that such blanket reservation was of doubtful validity and on the further ground that it did not reserve to the mortgagee the right to insist on a delineation of such easement along reasonably traversable grades or contours.

(12) On March 18, 1963, Mrs. Blanche Hill, president of Kona Corporation, presented to Hustace a revised draft of release, which made the easements for water tanks and water pipelines applicable only to existing facilities, and described the roadway easement as running 'from the southeasterly side of the old Government Road above mentioned to Course 3 above described along reasonably traversable grades or contours satisfactory to the Mortgagee,' the government road and the course referred to being the road and course identified in the survey description of the 264-acre parcel.

(13) At the time Mrs. Hill presented the revised draft of release, she told Hustace that Kona Corporation would not pay the installment of principal and interest on the promissory note which was due on that day,

(14) The 200 acres Adair sought to have conveyed to him was part of the 264-acre parcel which Kona Corporation requested Hustace to release.

(15) Neither Kona Corporation, nor anyone on its behalf, ever paid to Hustace any of the amounts specified in the promissory note, and Hustace did not comply with Kona Corporation's request for release of the 264-acre parcel.

On this...