Bank of Hawaii v. Horwoth
| Decision Date | 23 February 1990 |
| Docket Number | No. 13273,13273 |
| Citation | 787 P.2d 674,71 Haw. 204 |
| Court | Hawaii Supreme Court |
| Parties | BANK OF HAWAII, Plaintiff-Appellee, v. Steve Ronald HORWOTH and Brenda Lee Horwoth, Defendants-Appellants, and Robert Joseph Anthony, Annette Gean Anthony, GECC Financial Corporation, Defendants-Appellees, and Chester Raymond Owen, et al., Defendants. |
Syllabus by the Court
1. An agreement of sale in this jurisdiction is a common and established device utilized in the sale and purchase of real property or an estate therein. It is an executory contract which binds the vendor to sell and the vendee to buy the realty or the estate therein which constitutes the subject matter of the transaction.
2. Under an agreement of sale covering real property or an interest therein, the legal title to the property remains in the seller; but upon the execution and delivery of the agreement of sale, there accrues to the purchaser an equitable interest in the land. The legal title is retained by the seller essentially as security for the payment by the purchaser of the purchase price.
3. In some respects, and for some purposes, the agreement of sale is executory in equity as well as at law; but so far as the interest or estate in the land is concerned, it is regarded as executed, and as operating to transfer the interest or estate from the seller and to vest it in the purchaser. This is so because equity regards and treats as done what ought to be done. By the terms of the agreement of sale, the interest or estate in the land ought to be conveyed to the purchaser, and the purchase price ought to be transferred to the seller. Equity therefore regards these as done: the purchaser having acquired the property in the land, and the seller as having acquired the property in the price. Put another way, there is an equitable conversion; the purchaser's interest is at once converted into an interest or estate in real property with all its features and incidents, while the seller's interest is to the same extent, personal estate.
4. When equitable conversion occurs, the vendee is looked upon and treated as the owner of the land or the estate therein, an equitable estate has vested in him commensurate with that provided for by the agreement of sale, whether in fee, for life, or for years. The equitable interest of the vendor is correlative with that of the vendee; his beneficial interest in the land is gone, and only the naked legal title remains, which he holds in trust for the vendee, accompanied, however, by a lien upon the land as security when any of the purchase price remains unpaid. This lien, like every other equitable lien, is not an interest in the land, is neither a jus ad rem nor a jus in re, but merely an encumbrance.
5. Although Hawaii Revised Statutes (HRS) § 636-3 provides in part that "any money judgment ... of a state court ... shall be a lien upon real property when a copy thereof, certified as correct by a clerk of the court where it is entered, is recorded in the bureau of conveyances[,]" the recording of a judgment by a judgment creditor of the seller under an agreement of sale covering a leasehold estate did not ripen into a lien on the leasehold estate. For upon the execution of the agreement of sale, the judgment debtor no longer had an interest or estate in real property.
6. An action seeking to foreclose a mortgage is a matter within the cognizance of a court of equity.
7. Standing is that aspect of justiciability focusing on the party seeking a forum rather than on the issues he wants adjudicated. The party focused upon is almost invariably the plaintiff. Courts employ standing doctrines in deciding whether the litigant advancing a claim is or is not properly situated to be entitled to its adjudication.
8. A default judgment may not extend to matters outside the issues raised by the pleadings or beyond the scope of the relief demanded.
9. A ruling that the owner of mortgaged property could be dispossessed of the surplus proceeds of a foreclosure sale merely because he did not respond to the mortgagee's complaint, which made no claim thereto, would be totally inconsistent with due process.
Philip D. Bogetto, Honolulu, for defendants-appellants.
Edward M. Tsuji, Honolulu (Gary Y. Shigemura and Anthony D. Valdez with him on the brief; Shigemura & Harakal, of counsel), for defendant-appellee Robert J. Anthony.
Allen I. Marutani and Richard S. Kawana, Honolulu, on the brief for defendant-appellee GECC Financial Corp.
Before LUM, C.J., PADGETT, HAYASHI and WAKATSUKI, JJ., and Retired Justice NAKAMURA, assigned by reason of vacancy.
The question in this appeal from the final order in an action brought by the Bank of Hawaii to foreclose three mortgages executed by Robert J. Anthony and Annette G. Anthony is how the surplus proceeds of the sale of the mortgaged property, a leasehold estate subject to an agreement of sale, should be disbursed. The Circuit Court of the First Circuit distributed the surplus to the Anthonys, the sellers under the agreement, and to GECC Financial Corporation, a judgment creditor of the Anthonys. We conclude the circuit court erred in doing so because the agreement of sale operated to vest the equitable and beneficial ownership of the property in Steven R. Horwoth and Brenda L. Horwoth, the purchasers, and they had standing to claim the surplus despite their default in responding to the bank's complaint.
Robert J. Anthony and Annette G. Anthony, who were then husband and wife, 1 acquired the leasehold estate in a parcel of real property, situated in Kailua, Oahu and owned in fee by the Trustees of the Estate of Bernice Pauahi Bishop, through a mesne conveyance in 1978. Between 1978 and 1982, Mr. and Mrs. Anthony obtained three loans amounting to $101,000 in the aggregate from the Bank of Hawaii. The loans were evidenced by promissory notes and secured by mortgages on the property.
The Anthonys sold the leasehold thereafter to Steven R. Horwoth and Brenda L. Horwoth, the agreement of sale being executed and recorded in the Bureau of Conveyances on September 29, 1982. The Horwoths agreed to pay $128,000 for the property, make a down payment of $20,000, and make monthly payments as stipulated in the agreement of sale. 2
The Anthonys also owed GECC Financial Corporation a substantial sum, and GECC obtained a judgment against them for more than $16,000 on May 1, 1984. 3 The judgment lien was recorded in the Bureau of Conveyances on May 25, 1984. Subsequently, Mr. Anthony acknowledged he could not pay his debts as they became due by filing a bankruptcy petition in or about September of 1985. The Horwoths apparently continued to make payments under the agreement of sale, despite Mr. Anthony's bankruptcy, until the bank's action was filed.
The Bank of Hawaii filed its action to foreclose the three mortgages on December 3, 1986, after the automatic stay of suits against a bankrupt provided by the federal bankruptcy laws was lifted. The bank named the Anthonys, the Horwoths, and GECC Financial Corporation as defendants; 4 it averred the Anthonys were delinquent in repaying the three loans and prayed that the mortgages given as security be foreclosed. Mr. Anthony and GECC responded to the complaint; 5 Mrs. Anthony and the Horwoths did not, and defaults were entered against them by the clerk of the circuit court. But neither Mr. Anthony nor GECC asserted a counterclaim or a cross-claim against any party to the proceeding.
Thereafter, the bank sought summary judgments against Mr. Anthony and GECC, default judgments against Mrs. Anthony and the Horwoths, an interlocutory decree of foreclosure, and an order for the sale of the mortgaged property. The circuit court awarded the bank the relief it sought. The court, however, "reserve[d] JURISDICTION to determine the party or parties to whom any surplus [from the proceeds of the sale] shall be awarded herein."
The mortgaged property was sold by the court-appointed commissioner for $131,000. After the satisfaction of the debt and interest owing to the bank, the payment of taxes and lease rent, the payment of the commissioner's fee and expenses, and the payment of attorneys' fees for services rendered the plaintiff and costs, there was a sum of $23,876.54 remaining from the proceeds of the sale. The Horwoths retained counsel at this time and sought the disbursement of the surplus to themselves. The circuit court denied the motion, as well as the succeeding motion to reconsider the denial. The denial of reconsideration was premised on the court's conclusion that the provisions of Hawaii Revised Statutes (HRS) § 502-85(a)(2), which became effective on May 30, 1984, 6 did not apply to the agreement of sale and the judgment in question. 7
The Horwoths then filed a motion seeking relief under Rule 60(b) of the Hawaii Rules of Civil Procedure (HRCP), arguing they were "the only beneficial and equitable owners of the property under the terms of the agreement of sale." GECC countered with a motion seeking the distribution of the surplus to itself and Robert J. Anthony; it argued the Horwoths did not have standing to seek the desired relief because defaults had been entered against them in the foreclosure proceedings and they also breached the agreement of sale by not continuing to make the agreed monthly payments.
Mr. Anthony joined in GECC's motion, and they agreed in writing that Mrs. Anthony, who like the Horwoths did not respond to the Bank of Hawaii's complaint and against whom a default also had been entered, would receive a part of the surplus. The circuit court denied the Horwoths' motion, granted GECC's motion, and entered an order distributing the surplus proceeds to GECC, Mr. Anthony, and Mrs. Anthony. The Horwoths' timely appeal to this court followed.
When the owner of all or some part of the title to property mortgages the property as security for a debt and then defaults in paying the debt, "[t]he ...
To continue reading
Request your trial
-
Beneficial Hawaii, Inc. v. Kida
...is a proceeding equitable in nature and is thus governed by the rules of equity. See, e.g., Bank of Hawaii v. Horwoth, 71 Haw. 204, 213 & 213 n. 9, 787 P.2d 674, 679-80 & 680 n. 9 (1990) (citing Honolulu Plantation Co. v. Tsunoda, 27 Haw. 835, 840 (1924); Honolulu, Ltd. v. Blackwell, 7 Haw.......
-
Fujimoto v. Au
...A. Miller & E. Cooper, Federal Practice and Procedure: Jurisdiction 2d § 3531 at 338-39 (1984). See also Bank of Hawai`i v. Horwoth, 71 Haw. 204, 214, 787 P.2d 674, 680 (1990); Life of the Land v. Land Use Comm'n, 63 Haw. 166, 172, 623 P.2d 431, 438 (1981). On the other hand, the real party......
-
Leslie v. Estate of Tavares
...does not comport with the HRCP's goal of "reflect[ing] the essentials of due process and fair play," see Bank of Hawaii v. Horwoth, 71 Haw. 204, 216, 787 P.2d 674, 681 (1990), or the prescription of HRCP Rule 1 (1996) that the rules "shall be construed to secure the just ... determination o......
-
In re Genesys Data Technologies, Inc.
...of a default judgment in violation of HRCP Rule 54(c) implicates the defendant's right to due process. See Bank of Hawaii v. Horwoth, 71 Haw. 204, 215, 787 P.2d 674, 680 (1990) ("[I]t would be fundamentally unfair to give greater or different relief from that prayed for since a defaulting d......