Beneficial Hawaii, Inc. v. Kida, No. 22420.

CourtSupreme Court of Hawai'i
Writing for the CourtMOON, C.J., and LEVINSON, and NAKAYAMA, JJ.
Citation96 Haw. 289,30 P.3d 895
PartiesBENEFICIAL HAWAII, INC., a Delaware corporation, Plaintiff-Appellee, v. Donald Muneo KIDA, Defendant-Appellant, and John Does 1-50; Jane Does 1-50; Doe Partnerships, Doe Corporations, Doe Entities and Doe Governmental Units 1-50, Defendants, and Donald Muneo Kida, Counterclaimant, v. Beneficial Hawaii, Inc., Counterclaim-Defendant. Donald Muneo Kida, Third-Party Plaintiff, v. Michele Kobayashi fka Michele Umeno aka Michele Fukuda Umeno, individually and dba R.M. Financial Associates; R & M Associates, Inc., a Hawaii Corporation, Financial M.D. Associates, Inc., a Hawaii Corporation, directly and dba The Mortgage Warehouse; Milburn Iwai dba Pacific Mortgage Funding Group; Pacific Mortgage Funding Group, Ltd.; a Hawaii Corporation; Elaine F. Naito; UK Holding Corporation dba Equity Funding Group; JOHN DOES 1-10; Jane Does 1-10; Doe Corporations 1-10; Doe Partnerships 1-10; Doe Mortgage Corporations 1-5; Doe Financial Corporations 1-5; Doe Principal Mortgage Brokers 1-5; Doe Governmental Entities 1-10, Third-Party Defendants.
Decision Date31 August 2001
Docket NumberNo. 22420.

30 P.3d 895
96 Haw.
289

BENEFICIAL HAWAII, INC., a Delaware corporation, Plaintiff-Appellee,
v.
Donald Muneo KIDA, Defendant-Appellant, and
John Does 1-50; Jane Does 1-50; Doe Partnerships, Doe Corporations, Doe Entities and Doe Governmental Units 1-50, Defendants, and
Donald Muneo Kida, Counterclaimant,
v.
Beneficial Hawaii, Inc., Counterclaim-Defendant.
Donald Muneo Kida, Third-Party Plaintiff,
v.
Michele Kobayashi fka Michele Umeno aka Michele Fukuda Umeno, individually and dba R.M. Financial Associates; R & M Associates, Inc., a Hawaii Corporation, Financial M.D. Associates, Inc., a Hawaii Corporation, directly and dba The Mortgage Warehouse; Milburn

Page 896

Iwai dba Pacific Mortgage Funding Group; Pacific Mortgage Funding Group, Ltd.; a Hawaii Corporation; Elaine F. Naito; UK Holding Corporation dba Equity Funding Group; JOHN DOES 1-10; Jane Does 1-10; Doe Corporations 1-10; Doe Partnerships 1-10; Doe Mortgage Corporations 1-5; Doe Financial Corporations 1-5; Doe Principal Mortgage Brokers 1-5; Doe Governmental Entities 1-10, Third-Party Defendants

No. 22420.

Supreme Court of Hawai`i.

August 31, 2001.


30 P.3d 900
Shelby Anne Floyd, Jade Lynne Ching, and David A. Fisher (of Alston Hunt Floyd & Ing), on the briefs, Honolulu, for the plaintiff-appellee Beneficial Hawaii

Junsuke Otsuka (of Shigemura & Harakal), on the briefs, for the defendant-appellant Donald M. Kida.

MOON, C.J., and LEVINSON, and NAKAYAMA, JJ.

Opinion of the Court by LEVINSON, J.

The defendant-appellant Donald Muneo Kida appeals from the judgment and decree of foreclosure of the first circuit court, the Honorable Marie N. Milks presiding, filed on March 15, 1999, in favor of the plaintiff-appellee Beneficial Hawaii, Inc. Kida argues that the circuit court erred in: (1) failing to invalidate an alleged mortgage (the mortgage) on a property located at 2532 Booth Road, in the City and County of Honolulu (the property), and an alleged note (the note), secured by the mortgage, inasmuch as the note and mortgage were (a) void and unenforceable pursuant to Hawai`i Revised Statutes (HRS) § 454-8 (1993),1 (b) forged

30 P.3d 901
and/or altered, (c) executed in favor of an unregistered partnership, The Mortgage Warehouse, which did not have a legal capacity to contract, and (d) unsupported by any consideration from The Mortgage Warehouse; (2) concluding that Kida ratified the note and mortgage, inasmuch as (a) an illegal contract may not be ratified, (b) Kida did not know all material facts and did not have an opportunity to return the benefits received on account of the note; (3) finding that Kida's purported agent, who drafted the note and mortgage in his name, acted within the scope of her alleged authority, inasmuch as her actions were (a) not customary in the lending industry and (b) illegal; (4) finding that the note was validly (a) assigned from The Mortgage Warehouse to Novus Financial Corporation and from Novus Financial Corporation to Beneficial Mortgage Corporation and (b) transferred from Beneficial Mortgage Corporation to Beneficial Hawaii; (5) concluding that Beneficial Hawaii was entitled to enforce the note, inasmuch as (a) the endorsements requisite to conferring upon Beneficial Hawaii the status of a holder of the note within the meaning of HRS ch. 490 (Uniform Commercial Code) were not supplied until after the present action had commenced and (b) there was no evidence that the note was in the possession of or negotiated to Novus Financial Corporation, Beneficial Hawaii's predecessor in the chain of ownership; and (6) applying the doctrine of equitable subrogation to find Kida liable to Beneficial Hawaii upon the note and mortgage, inasmuch as (a) Beneficial Hawaii did not plead an equitable subrogation claim, (b) Beneficial Hawaii did not exhaust its legal remedies, (c) Beneficial Hawaii did not advance any money to benefit Kida, (d) the entity that originally advanced funds to satisfy an agreement to sell the property, which appeared to have been either Novus Financial Corporation or Novus Credit Services, did not pay to protect its own interest, (e) an equitable subrogation claim is barred by the doctrine of unclean hands, (f) the funds advanced pursuant to the note did not satisfy a prior encumbrance on the property, and (g) the doctrine of equitable subrogation may not be the basis of a foreclosure decree absent a prior decree of equitable subrogation and Kida's default under such a decree

We hold that the note and mortgage were void and unenforceable pursuant to HRS § 454-8. Accordingly, we do not reach Kida's points of error regarding the formation of the loan contract, his purported ratification of the loan, and Beneficial Hawaii's right to enforce the note and mortgage. We

30 P.3d 902
further hold that the circuit court erred in applying the doctrine of equitable subrogation to the present matter. Inasmuch as Beneficial Hawaii failed to adduce evidence sufficient to prove that it was entitled to any equitable relief, we reverse the circuit court's judgment and decree of foreclosure in favor of Beneficial Hawaii, filed on March 15, 1999

I. BACKGROUND

A. Procedural History

In a complaint filed on December 2, 1996, Beneficial Hawaii alleged (1) that Kida was the owner of the property, (2) that, on July 11, 1994, Kida had mortgaged the property to The Mortgage Warehouse to secure repayment of a $300,000.00 loan pursuant to a note signed by Kida, (3) that, through several mesne assignments, Beneficial Hawaii had become the owner of the note and mortgage, and (4) that Kida had defaulted on the loan and owed $294,296.10 of principal, plus accrued interest and late charges. Beneficial Hawaii prayed for a foreclosure sale of the property, the proceeds thereof to be used to satisfy Kida's alleged obligations under the note.

In his answer, filed on January 16, 1997, Kida admitted his ownership of the property as of October 9, 1996 but denied signing either the note or the mortgage and, therefore, any liability for payment of the sums allegedly due under the note. At the same time, Kida filed a counterclaim against Beneficial Hawaii and a third-party complaint against defendants Michele Kobayashi, R & M Associates, Inc., Financial M.D. Associates, Inc., Milburn Iwai, Pacific Mortgage Funding Group Ltd., Elaine Naito, and UK Holding Corporation. Kida alleged in the counterclaim, inter alia, that Kobayashi had forged his signature on the loan documents, wrongfully obtained and/or diverted the loan proceeds, and concealed the existence of the loan by making some of the payments required under the note and retaining all correspondence concerning the mortgage. In his third-party complaint, Kida alleged, inter alia, (1) that Kobayashi's license as a mortgage broker was terminated on February 12, 1992, (2) that, pursuant to a consent judgment, filed in the first circuit court on July 18, 1994 and reiterated in a consent judgment filed in the first circuit court on November 24, 1995, Kobayashi and her agents, officers, servants, and employees were enjoined from providing any services for which a mortgage broker's license was required, (3) that Kobayashi was an officer, director, employee, and/or agent of Financial M.D. Associates, which was doing business as The Mortgage Warehouse and was not licensed to act as a mortgage broker, and (4) that, on July 11, 1994, Kobayashi made, negotiated, or acquired the mortgage on Kida's behalf. Kida sought relief, inter alia, for fraud and misrepresentation, breach of fiduciary duty, unfair and deceptive trade practices, violations of HRS ch. 454 ("Mortgage Brokers and Solicitors"), see supra note 1, negligence, and conspiracy.2

On February 25, 1997, Beneficial Hawaii answered Kida's counterclaim and cross-claimed against Kobayashi, R & M Associates, Financial M.D. Associates, Iwai, Pacific Mortgage Funding Group, Naito, and UK Holding for indemnification. On March 3, 1997, Iwai and Pacific Mortgage Funding Group filed an answer and a cross-claim against Kobayashi, R & M Associates, Financial M.D. Associates, Naito, and UK Holding for indemnification and/or contribution. On May 29, 1998, the parties filed a stipulation to dismiss Kida's third-party complaint and other parties' cross-claims against UK Holding.

30 P.3d 903
On July 29, 1998, Kida filed a motion to dismiss his claims against Iwai and Pacific Mortgage Funding Group pursuant to a settlement reached among the parties; the circuit court granted the motion by order entered on November 23, 1998.

A bench trial in the present matter commenced on August 25, 1998. On September 3, 1998, following the evidentiary portion of the trial, the parties placed stipulations on the record regarding dismissal of (1) Kida's counterclaim against Beneficial Hawaii, (2) Beneficial Hawaii's cross-claim against Kobayashi and her entities, R & M Associates and Financial M.D. Associates, (3) Beneficial Hawaii's cross-claim against Iwai and Naito, and (4) Iwai and Pacific Mortgage Funding Group's cross-claim against Kobayashi, R & M Associates, and Financial M.D. Associates. The following stipulations to dismiss were ultimately filed on the dates listed: (1) November 12, 1998—stipulation to dismiss Kida's third party complaint and Iwai and Pacific Mortgage Funding Group's cross-claim against Kobayashi, R & M Associates, and Financial M.D. Associates; (2) November 18, 1998—stipulation to dismiss Kida's counterclaim against Beneficial Hawaii; (3) December 3, 1998—stipulation to dismiss Beneficial Hawaii's cross-claim against Kobayashi, R & M Associates, and Financial M.D. Associates; and (4) December 21, 1998—stipulation to dismiss Kida's third-party complaint and Iwai and Pacific Mortgage Funding Group's cross-claim against Naito. Following these stipulations, the only claim effectively remaining in the present matter was Beneficial Hawaii's original claim against Kida.3

B. Trial Testimony

1. Beneficial Hawaii's case

a. Michele Kobayashi

At...

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105 practice notes
  • Marvin v. Pflueger, No. SCWC–28501.
    • United States
    • Hawaii Supreme Court
    • April 27, 2012
    ...standard. Bremer v. Weeks, 104 Hawai‘i 43, 51, 85 P.3d 150, 158 (2004) (citing Beneficial Hawaii, Inc. v. Kida, 96 Hawai‘i 289, 305, 30 P.3d 895, 911 (2001) ).A finding of fact is clearly erroneous when, despite evidence to support the finding, the appellate court is left with the definite ......
  • DAIICHI HAWAI'I REAL ESTATE v. Lichter, No. 23285.
    • United States
    • Supreme Court of Hawai'i
    • December 30, 2003
    ...Transportation Co., Inc., 91 Hawai'i 224, 239, 982 P.2d 853, 868 (1999). Beneficial Hawai'i, Inc. v. Kida, 96 Hawai'i 289, 305, 30 P.3d 895, 911 (2001) (quoting Leslie v. Estate of Tavares, 91 Hawai'i 394, 399, 984 P.2d 1220, 1225 (1999)) (some brackets added and some in III. DISCUSSION A. ......
  • In Matter of Arbitration Between Daiichi Hawaii Real Estate Corporation v. Lichter, No. 23285 (Haw. 12/30/2003), No. 23285
    • United States
    • Supreme Court of Hawai'i
    • December 30, 2003
    ...Laupahoehoe Transportation Co., Inc., 91 Hawai`i 224, 239, 982 P.2d 853, 868 (1999). Beneficial Hawaii, Inc. v. Kida, 96 Hawai`i 289, 305, 30 P.3d 895, 911 (2001) (quoting Leslie v. Estate of Tavares, 91 Hawai`i 394, 399, 984 P.2d 1220, 1225 (1999)) (some brackets added and some in III. DIS......
  • Zanakis-Pico v. Cutter Dodge, Inc., No. 22987.
    • United States
    • Supreme Court of Hawai'i
    • June 14, 2002
    ...construed to avoid, if possible, inconsistency, contradiction, and illogicality." Beneficial Hawai`i, Inc. v. Kida, 96 Hawai`i 289, 309, 30 P.3d 895, 914-15 (2001) (citations and internal quotation marks omitted). See also HRS § 1-15(3) (1993) ("Every construction which leads to an absurdit......
  • Request a trial to view additional results
105 cases
  • Marvin v. Pflueger, No. SCWC–28501.
    • United States
    • Hawaii Supreme Court
    • April 27, 2012
    ...standard. Bremer v. Weeks, 104 Hawai‘i 43, 51, 85 P.3d 150, 158 (2004) (citing Beneficial Hawaii, Inc. v. Kida, 96 Hawai‘i 289, 305, 30 P.3d 895, 911 (2001) ).A finding of fact is clearly erroneous when, despite evidence to support the finding, the appellate court is left with the definite ......
  • DAIICHI HAWAI'I REAL ESTATE v. Lichter, No. 23285.
    • United States
    • Supreme Court of Hawai'i
    • December 30, 2003
    ...Transportation Co., Inc., 91 Hawai'i 224, 239, 982 P.2d 853, 868 (1999). Beneficial Hawai'i, Inc. v. Kida, 96 Hawai'i 289, 305, 30 P.3d 895, 911 (2001) (quoting Leslie v. Estate of Tavares, 91 Hawai'i 394, 399, 984 P.2d 1220, 1225 (1999)) (some brackets added and some in III. DISCUSSION A. ......
  • In Matter of Arbitration Between Daiichi Hawaii Real Estate Corporation v. Lichter, No. 23285 (Haw. 12/30/2003), No. 23285
    • United States
    • Supreme Court of Hawai'i
    • December 30, 2003
    ...Laupahoehoe Transportation Co., Inc., 91 Hawai`i 224, 239, 982 P.2d 853, 868 (1999). Beneficial Hawaii, Inc. v. Kida, 96 Hawai`i 289, 305, 30 P.3d 895, 911 (2001) (quoting Leslie v. Estate of Tavares, 91 Hawai`i 394, 399, 984 P.2d 1220, 1225 (1999)) (some brackets added and some in III. DIS......
  • Zanakis-Pico v. Cutter Dodge, Inc., No. 22987.
    • United States
    • Supreme Court of Hawai'i
    • June 14, 2002
    ...construed to avoid, if possible, inconsistency, contradiction, and illogicality." Beneficial Hawai`i, Inc. v. Kida, 96 Hawai`i 289, 309, 30 P.3d 895, 914-15 (2001) (citations and internal quotation marks omitted). See also HRS § 1-15(3) (1993) ("Every construction which leads to an absurdit......
  • Request a trial to view additional results

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