Ai v. Frank Huff Agency, Ltd., 7039

• Citation: 61 Haw. 607,607 P.2d 1304
• Decision Date: 06 March 1980
• Docket Number: No. 7039,7039
• Parties: Vernon AI and Sandra Fukuhara, Plaintiffs-Appellees, v. FRANK HUFF AGENCY, LTD., a Hawaii Corporation, Defendant-Appellant.
• Court: Supreme Court of Hawai'i

Page 1304

607 P.2d 1304

61 Haw. 607

Vernon AI and Sandra Fukuhara, Plaintiffs-Appellees, v. FRANK HUFF AGENCY, LTD., a Hawaii Corporation, Defendant-Appellant.

No. 7039.

Supreme Court of Hawai'i.

March 6, 1980.

Syllabus by the Court

1. Under H.R.C.P. Rule 56(c), a summary judgment will be rendered only if the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

2. HRS § 480-13 authorizes an action for damages to "(a)ny person who is injured in his business or property by reason of anything forbidden or declared unlawful by this chapter (chapter 480)." To exclude § 480-2 from the impact of a private action for damages is clearly contrary to the plain wording of the statute.

3. We find that it is unnecessary for plaintiffs to allege commercial or competitive injury in order for plaintiffs to have standing under HRS § 480-13; it is sufficient that plaintiffs allege that injury occurred to personal property through a payment of money wrongfully induced.

4. In order for plaintiffs to have standing to sue for damages under HRS § 480-13, it is necessary that there be present allegations adequate to show either that defendant "is a merchant as that term is defined in chapter 490" or "that the proceeding or suit would be in the public interest (as these terms are interpreted under section 5(b) of the Federal Trade Commission Act)."

5. Under the antitrust laws, certain types of conduct are so prejudicial to the public interest that, as a matter of law, they may not be justified or held to be reasonable.

6. Where a per se violation is claimed, allegations adequate to show a violation and, in a private treble damage action, that plaintiff was damaged thereby, are all the law requires.

7. Violations of HRS Chapter 443 are per se "unfair or deceptive acts or practices" for the purposes of HRS § 480-2.

8. HRS § 480-13 establishes four essential elements: (1) a violation of chapter 480; (2) injury to plaintiff's business or property resulting from such violation; (3) proof of the amount of damages; and (4) a showing that the action is in the public interest or that the defendant is a merchant.

9. Since HRS § 443-23 denies collection of attorney's fees unless proceedings are in fact brought against a debtor, and since such fees are, in any event, limited to 25% of the unpaid principal balance, 331/3% attorney's fees as required of plaintiffs by defendant's promissory note could not legally be added to the existing obligation of the debtor. The representation that the obligation of the debtor could be so increased was therefore in violation of § 443-44(8).

10. While proof of a violation of chapter 480 is an essential element of an action under § 480-13, the mere existence of a violation is not sufficient ipso facto to support the action; forbidden acts cannot be relevant unless they cause private damage.

11. It is well settled under ordinary contract law that a partially illegal contract may be upheld if the illegal portion is severable from the part which is legal. And the "divisibility" rule does not lose its vitality where the contract provision is illegal by virtue of the antitrust laws.

12. In view of the continuing obligation of the plaintiffs to make payments under the note severed of its offending clause, and in view of the fact plaintiffs have actually made no payments beyond the amount of their existing obligation, we find no legal injury to plaintiffs cognizable under HRS § 480-13; hence, plaintiffs were not entitled to an award of $1,000.

Stuart H. Oda, Hilo, for defendant-appellant.

Dennis Niles, Legal Aid Society of Hawaii, Hilo, of counsel, for plaintiffs-appellees.

Before RICHARDSON, C. J., OGATA and MENOR, JJ., MARUMOTO, Retired Justice, and LUM, Circuit Judge, assigned by reason of vacancies.

LUM, Circuit Judge.

This is an interlocutory appeal by defendant-appellant, Frank Huff Agency, Ltd., from the order of the circuit court granting partial summary judgment for plaintiffs-appellees, Vernon Ai and Sandra Fukuhara. We affirm in part and reverse and remand in part.

FACTS AND PROCEEDINGS BELOW

On August 2, 1974, plaintiffs executed and delivered to defendant, a collection agency, a promissory note payable in the amount of $2,061.76. The promissory note, which was prepared by defendant collection agency, was given in satisfaction of a default judgment earlier obtained by defendant against plaintiff Ai; the judgment amount was $1,293.39, which included an award of attorney's fee of $252.62. The note was also given in satisfaction of certain other unliquidated indebtedness owed by plaintiff Ai to Beneficial Finance Company of Hawaii and Dial Finance Company of Hawaii. The promissory note provided that should plaintiffs default on the note, and should the note be "placed in the hands of an attorney for collection," plaintiffs would "pay attorney's fees at the rate of 331/3% of the amount due thereon, whether suit be instituted or not."

On June 23, 1976, after making 19 payments totaling $855.00, plaintiffs filed a Complaint for Declaratory Judgment in three counts. ¹ Count I alleged that defendant, in violation of HRS §§ 443-44(8) and 480-2, ² had represented in the August promissory note that the existing obligation of the plaintiffs might be increased by the addition of attorney's fees when in fact such fees could not legally be added to the existing obligation. Plaintiffs based Count I on the 25% limitation on attorney's fees against a debtor permitted only after the filing of suit under HRS § 443-23, ³ and the total statutory disallowance of attorney's fees under HRS § 607-17 where an instrument in writing which provides for payment of an attorney's fee contains within its principal amount any attorney's fee from a prior debt. ⁴

On September 22, 1977, plaintiffs filed a motion for summary judgment on Count I. The court subsequently granted plaintiff's motion. The court concluded that Frank Huff committed a per se violation of HRS § 443-44(8) when it obtained from plaintiffs a promissory note providing for an attorney's fee in the amount of 331/3% of the unpaid principal whether or not suit was filed. The court recognized that, pursuant to HRS § 443-47, ⁵ the commission by a collection agency of a practice prohibited by Chapter 443 is to be characterized as an unfair or deceptive act or practice for the purpose of HRS § 480-2; it accordingly decreed that the promissory note was null, void and unenforceable at law or in equity under HRS § 480-12, ⁶ and awarded damages to plaintiffs in the amount of $1,000.00 plus costs as provided by HRS § 480-13(a)(1). ⁷ Frank Huff timely appeals from the grant of partial summary judgment.

OPINION

Under H.R.C.P. Rule 56(c), a summary judgment will be rendered only if the record shows that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Lau v. Bautista, 61 Haw. 144, 146-47, 598 P.2d 161, 163 (1979); City and County of Honolulu v. Toyama, 61 Haw. 156, 158, 598 P.2d 168, 170-71 (1979); Hunt v. Chang, 60 Haw. 608, 618, 594 P.2d 118, 124 (1979). See Moore's Federal Practice P 56.17(68) at 56-1100 (2d ed. 1976).

Although defendant asserts that numerous factual questions were presented to the trial court which precluded disposition by summary judgment, upon review of the record, we have concluded that there is no genuine issue of a material fact. We therefore turn to an examination of the legal issues in this case.

I. STANDING

Plaintiffs, claiming a deceptive trade practice in violation of HRS § 480-2, sue for damages under § 480-13. ⁸ Defendant contends that plaintiffs, as private persons, lack standing to sue for such relief. ⁹ Defendant points to sections of Chapter 480 which specifically confer to the attorney general and director of the office of consumer protection enforcement power over violations of § 480-2 as conclusive evidence that the legislature had not intended individual enforcement of § 480-2. We disagree.

HRS § 480-13 authorizes an action for damages to "(a)ny person who is injured in his business or property by reason of anything forbidden or declared unlawful by this chapter (chapter 480)." (Emphasis added.) To exclude HRS § 480-2 from the impact of a private action for damages, as defendant would have us do, is clearly contrary to the plain wording of the statute. ¹⁰ Nor are we prepared by judicial construction to weaken the efficacy or expanse of private enforcement under the Hawaii antitrust laws. See Radovich v. National Football League, 352 U.S. 445, 454, 77 S.Ct. 390, 395, 1 L.Ed.2d 456 (1957); Flintkote Co. v. Lysfjord, 246 F.2d 368, 398 (9th Cir.), cert. denied, 355 U.S. 835, 78 S.Ct. 54, 2 L.Ed.2d 46 (1957).

Defendant notes, however, that even if an individual may sue for a violation of HRS § 480-2, a private plaintiff must allege and prove that he was injured in his business or property before damages will be assessed under § 480-13. Citing Hawaii v. Standard Oil Co., 405 U.S. 251, 92 S.Ct. 885, 31 L.Ed.2d 184 (1972), and Weinberg v. Federated Department Stores, Inc., 426 F.Supp. 880 (N.D.Cal.1977), appeal docketed, 605 F.2d 565 (9th Cir.), defendant contends that standing is limited by the term "business or property" to persons who allege a commercial or competitive injury. Defendant accordingly argues that plaintiffs lacked standing to sue for treble damages under § 480-13 because plaintiffs as consumers had not been injured in their "business or property" within the meaning of the statute.

Defendant's position is not unexpectable in view of the scanty legislative direction provided by the framers of HRS § 480-13 as well as by the framers of § 4 of the Clayton Act, its federal counterpart. ¹¹ In a recent decision of the United States Supreme Court, however, the question of whether consumers lacked standing to enforce the antitrust laws under such a provision...