Bank of Hawaii v. Shinn

• Decision Date: 29 December 2008
• Docket Number: No. 27832.,27832.
• Citation: 200 P.3d 370,120 Haw. 1
• Parties: BANK OF HAWAII, Respondent/Plaintiff-Appellee v. Michael L. SHINN, Petitioner/Defendant-Appellant and Bays, Deaver, Hiatt, Kawachika & Lezak, a Hawai`i partnership, Defendant-Appellee and Donald T. Eovino; Kahala Ventures, a Hawai`i general partnership; First Hawaiian Bank; Donald H. Wilson, as Trustee of the Jerry T. Lynn Charitable Remainder Trust; B & T Enterprises, a California corporation; Richard Wallace and Patricia Davison Wallace, as Trustees of the Muldoon & Associates Money Purchase Plan and Trust; Universal Securities Co., LTD., a Japan corporation; Loren H. Cook; Darcy H. Cook; J. Roger Allen; Cathreine G. Allen; John Does 1-50; Jane Does 1-50; Doe Partnerships 1-50; Doe Corporations 1-50; Doe Entities 1-50; and Doe Governmental Units 1-50, Defendants.
• Court: Hawaii Supreme Court

200 P.3d 370

120 Haw. 1

BANK OF HAWAII, Respondent/Plaintiff-Appellee v. Michael L. SHINN, Petitioner/Defendant-Appellant and Bays, Deaver, Hiatt, Kawachika & Lezak, a Hawai`i partnership, Defendant-Appellee and Donald T. Eovino; Kahala Ventures, a Hawai`i general partnership; First Hawaiian Bank; Donald H. Wilson, as Trustee of the Jerry T. Lynn Charitable Remainder Trust; B & T Enterprises, a California corporation; Richard Wallace and Patricia Davison Wallace, as Trustees of the Muldoon & Associates Money Purchase Plan and Trust; Universal Securities Co., LTD., a Japan corporation; Loren H. Cook; Darcy H. Cook; J. Roger Allen; Cathreine G. Allen; John Does 1-50; Jane Does 1-50; Doe Partnerships 1-50; Doe Corporations 1-50; Doe Entities 1-50; and Doe Governmental Units 1-50, Defendants.

No. 27832.

Supreme Court of Hawai`i.

December 29, 2008.

Reconsideration Denied February 17, 2009.

Gary Victor Dubin, Honolulu (Lon Huy Vu with him on the application), for petitioner/defendant-appellant.

Peter Van Name Esser, Honolulu (Mark T. Shklov and Michel A. Okazaki with him on the brief & response), for respondent/plaintiff-appellee Bank of Hawaii.

MOON, C.J., ACOBA, and DUFFY, JJ.; with LEVINSON, J., concurring separately, and dissenting, with whom NAKAYAMA, J., joins.

Opinion of the Court by ACOBA, J.

Petitioner/Defendant-Appellant Michael L. Shinn (Petitioner) seeks review of the judgment of the Intermediate Court of Appeals (ICA), filed on March 30, 2008, pursuant to its published opinion filed on February 29, 2008,¹ affirming the March 7, 2006 Order of the first circuit court (the court)² denying Petitioner's Hawai`i Rules of Civil Procedure (HRCP) Rule 60(b) (2008) motion (1) to set aside the court's December 18, 2003 Order granting the motion of Respondent/Plaintiff-Appellee Bank of Hawaii (Respondent) to extend a deficiency judgment against Petitioner entered on December 21, 1993, and (2) to expunge the court's December 21, 1993 joint and several judgment against Petitioner. See Bank of Hawaii v. Shinn, 118 Hawai`i 132, 138, 185 P.3d 880, 886 (App.2008).

We hold (1) that Hawai`i Revised Statutes (HRS) § 657-5 (Supp.2007)³ controls over HRCP Rule 5(a) (2008),⁴ and therefore, notice of a proposed extension of a judgment pursuant to HRS § 657-5 must be provided to the judgment debtor prior to the granting of the extension, even if the debtor is in default and is not required under HRCP Rule 5(a) to be served with pleadings; and (2) although the failure to provide notice under HRS § 657-7 (1993) to a party in default is error, such error was harmless under the circumstances of this case. Accordingly, the December 18, 2003 order granting extension of judgment was not void under HRCP Rule 60(b)(4).⁵ The error was harmless in this case because Petitioner had never appeared in the action to defend himself, he had an opportunity to be heard at the Rule 60(b) hearing, he offered no defense on the merits to the original judgment or the extension, and thus failed to demonstrate any prejudice. Therefore, the ICA's judgment is affirmed, albeit on different grounds.

I.

In 1990, Petitioner and his business associates formed Kahala Ventures, a Hawai`i partnership. On June 25, 1990, Kahala Ventures borrowed $1,500,000 from Respondent to develop property located in Kahala (property). The lending agreement required the loan to be repaid in full by January 1, 1993. On March 22 of that same year, Respondent filed its complaint for foreclosure and deficiency after Petitioner and his partners failed to make the payments. On April 1, 1993, the complaint and summons were served on Petitioner at his home. Respondent moved for summary judgment on the foreclosure later that month. Notice of the summary judgment motion and hearing were sent to Petitioner at the same address by U.S. mail. Petitioner filed no answer to the complaint and never appeared in court, resulting in a default judgment against him, entered by the clerk of the court on May 6, 1993.⁶

On June 23, 1993, the court granted Respondent's summary judgment motion. The Foreclosure Decree determined that $1,565,426.17 was due on the loan as of April 23, 1993, with per diem interest of $471.98 thereafter. By August of 1993, Respondent had sold the mortgaged property for $1,208,218.87.

On December 16, 1993, Respondent served the Affidavit of Michael C. Webb, requesting entry of a deficiency judgment against Petitioner and others in the amount of $467,120, on Petitioner by U.S. mail to the same residence in Kahala. On December 21, 1993, Respondent obtained a deficiency judgment against Petitioner and others, which was served on Petitioner, also via U.S. mail, to his Hawai`i address.

On August 9, 2000, Respondent filed a release of the judgment as to Petitioner's partner, Defendant Donald Eovino, due to his receipt of a discharge in bankruptcy.

On December 10, 2003, Respondent filed a motion to extend the deficiency judgment for an additional ten years, and to set aside an "order of dismissal," which had been entered on June 28, 2002, for inactivity. The motion to extend was not served on Petitioner. Eight days later, the court held a hearing on the motion and entered an order extending the judgment for ten years and setting aside the order of dismissal to the extent that it dismissed claims and parties that were already subject to judgment or otherwise previously dismissed.

Because Respondent did not notify Petitioner of its motion to extend, he did not learn of the extension until 2005. On January 17, 2006, Petitioner filed a HRCP Rule 60(b) motion seeking to void the trial court's 2003 grant of extension, and to expunge the extended deficiency judgment, which was recorded at the Bureau of Conveyances. Petitioner argued that HRS § 657-5 requires notice to the judgment debtor of any motion to extend a judgment, and that Petitioner had an absolute right to notice of the motion to extend.

The court heard argument on Petitioner's motion on February 7, 2006. At the hearing, Respondent "emphasized that [Petitioner] had never contested the default or appealed the underlying [j]udgment ... [and] ... raised no defenses on the merits to the original [j]udgment or its extension." Respondent also offered the testimony of its Vice President of Commercial Collections, David Bowman, by way of a declaration stating that Respondent had been informed on various occasions that Petitioner had moved back and forth between Colorado and Florida, to show that Respondent was unaware of Petitioner's exact address. Petitioner's arguments focused on the legislative intent in HRS § 657-5 that notice must be provided, on his belief that Respondent actually knew of his exact whereabouts at the time of the extension and that Respondent's assertions to the contrary were hearsay. On March 7, 2006, without announcing any findings of fact or conclusions of law, the court entered an order denying Petitioner's motion to set aside the extension of judgment.

On March 22, 2006, Petitioner filed his notice of appeal. On February 29, 2008, the ICA affirmed the court's March 7, 2006 order denying Petitioner's Rule 60(b) motion. The ICA determined, based on an in pari materia reading of HRS § 657-5 and HRCP Rules 5(a) and 55(b)(2) (2008),⁷ that Respondent was not required to provide notice to Petitioner prior to entry of the extension of judgment because the notice requirement does not apply to parties who fail to appear and are defaulted. Shinn, 118 Hawai`i at 136-37, 185 P.3d at 884-85. Therefore, the ICA concluded that the court had properly denied Petitioner's Rule 60(b) motion to set aside the extension of judgment. Petitioner filed his Application for Writ of Certiorari (Application) on June 18, 2008. This court accepted certiorari and oral argument on the merits was heard on October 16, 2008.

II.

Petitioner lists the following pertinent questions in his Application:⁸

1. Was Petitioner deprived of (a) his ... HRS [§] 657-5 statutory procedural rights, (b) his [a]rticle [I], [s]ection 5, State [c]onstitutional procedural rights, and (c) his Fifth and Fourteenth Amendment United States [c]onstitutional procedural rights when the lower court[,] without notice to him or service upon him extended the 1993 money judgment against him, rendering that extension defective and null and void?

2. Was the ICA correct in concluding that construing HRS [§ ]657-5 in pari material [sic] with HRCP [Rules] 5 and 55, a motion for extension of judgment need not be served upon a previously defaulted party, notwithstanding that notice requirement in HRS 657-5, because an extension on judgment request is supposedly not a new or additional claim?

(Emphases added.)⁹

III.

A.

Petitioner's first argument¹⁰ is that the trial court should not have granted Respondent's motion to extend the underlying judgment because he did not receive notice of the motion as required by HRS § 657-5. See HRS § 657-5 ("No extension shall be granted without notice and the filing of a non-hearing motion or a hearing motion to extend the life of the judgment or decree."). Petitioner argues "that the plain meaning of [the] statute is ... clear and unambiguous," and therefore should control.

Respondent, on the other hand, asserts that the confluence of HRCP Rules 5(a) and 55(b)(2) create an exception to the notice requirement in HRS § 657-5. See HRCP Rule 5(a) (stating that "no service need be made on parties in default for failure to appear"); HRCP Rule 55(b)(2) ("If the party against whom judgment by default is sought has appeared in the action, the party ... shall be served with written notice of the application for judgment at least 3 days prior to the hearing on such application.").¹¹ According to Respondent, HRS § 657-5 and HRCP Rule 5 are reconcilable and therefore both should be given effect. Respondent argues that when HRS § 657-5 and HRCP Rule 5 are read in pari materia, or construed with reference to one another, the notice requirement...