California Federal Sav. and Loan Ass'n v. Bell

Decision Date20 March 1987
Docket NumberNo. 11080,11080
Citation6 Haw.App. 597,735 P.2d 499
PartiesCALIFORNIA FEDERAL SAVINGS AND LOAN ASSOCIATION, Plaintiff-Appellee, v. Norma Rosalinde BELL, Defendant-Appellant, and FAF Canterbury Place, Ltd., Frederick Figge, Howard Copeland Hill, William John Bachran, Lorraine Marie Bachran, Association of Apartment Owners of Canterbury Place, by its Board of Directors, Defendants-Appellees, and John and Mary Does 1-20, and Doe Partnerships, Corporations or Other Entities 2-20, Defendants, and William John BACHRAN, Lorraine Marie Bachran, Third-Party Plaintiffs-Appellees, v. Peter Robert STROMER, Third-Party Defendant-Appellant.
CourtHawaii Court of Appeals

Syllabus by the Court

1. A defendant who does not by motion or in his answer challenge the trial court's in personam jurisdiction over him waives any such objection or defense.

2. As a general rule, matters relating to interests in land depend for their determination on the local law of the situs of the land.

3. As a general rule, foreclosures of executory contracts for the sale of land are governed by the local law of the situs of the land.

4. Hawaii has a governmental interest in ensuring the predictability of the legal consequences attending contracts involving the sale of real property in its jurisdiction and maintaining interstate order in such transactions, and Hawaii's law allowing deficiency judgments may be properly applied to an action foreclosing an agreement of sale for land located in Hawaii rather than California's statute prohibiting deficiency judgments in such actions, even though the agreement was executed in California by parties domiciled in that state.

5. The granting of equitable relief is addressed to the sound discretion of a trial court, and its decision will not be set aside unless manifestly against the clear weight of the evidence.

6. An equity court has plenary power to fashion its decree in such a manner as to recognize and maintain the equities of the parties.

Edward C. Kemper (Kemper & Watts, of counsel), Honolulu, for Bell and stromer.

Steven Guttman (Paul R. Gibson with him on brief; Law Offices of Steven Guttman, of counsel), Honolulu, for Bachrans.

Before BURNS, C.J., and HEEN and TANAKA, JJ.

HEEN, Judge.

Defendant-Appellant Norma Rosalinde Bell (Bell) and Third-Party Defendant-Appellant Peter Robert Stromer (Stromer) (where appropriate hereinafter Bell and Stromer will be collectively referred to as Appellants) appeal from the decree entered below foreclosing an agreement of sale of real property in which Stromer was the buyer and Bell was his assignee. We vacate the decree and remand with instructions to enter an amended decree.


There is no dispute over the facts involved here.

On March 2, 1978, Defendant-Appellee FAF Canterbury Place, Ltd. (FAF), a California limited partnership, through Defendants-Appellees Frederick Figge (Figge) and Howard Copeland Hill (Hill), its general partners, (where appropriate hereinafter FAF, Figge and Hill will be collectively referred to as FAF) executed a promissory note and a mortgage in favor of Realty Mortgage, Inc. (Realty Mortgage), a Hawaii corporation, for the purchase of apartment 27-A in the Canterbury Place condominium apartment building located at 1910 Ala Moana Boulevard. The mortgage contained what is commonly referred to as a "due-on-sale" clause, which provided that, with certain exceptions not material here, in the event FAF were to transfer its interest without the mortgagee's consent, the mortgagee could declare the entire sum secured by the mortgage to be due and payable. Realty Mortgage promptly assigned the note and mortgage to Plaintiff-Appellee California Federal Savings and Loan Association (California Federal).

Nearly three years later, FAF sold the apartment to Stromer under an agreement of sale (agreement) for $70,000 down and a balance of $280,000, due in full on March 1, 1984. Stromer was required to make monthly interest payments and to pay the lease rent, real property taxes and condominium maintenance fees. He also had the privilege to pay the entire balance before the agreement's maturity date. On the same day Stromer, with FAF's consent, assigned the agreement to Bell. The sale and assignment were not consented to in writing by California Federal as required by the mortgage.

Thereafter, FAF assigned its interest in the agreement and the condominium conveyance document covering the apartment to Defendants and Third-Party Plaintiffs-Appellees William John and Lorraine Marie Bachran (collectively the Bachrans). The assignment to the Bachrans was subject to California Federal's mortgage, but was not consented to by California Federal.

After California Federal learned of the assignment to the Bachrans, it wrote to FAF demanding payment in full, and also notified Figge, Hill, and the Bachrans by letter that it had done so. A letter to that effect was also sent to Bell but was never received by her. When payment was not made, California Federal filed the action below against FAF, Figge, Hill, the Bachrans, Bell, and Doe Defendants for foreclosure of its mortgage. California Federal later identified and served the Association of Apartment Owners of Canterbury Place (Association) as a defendant. Bell did not receive a copy of the complaint and only learned of the suit from Figge. Upon investigating the cause of the mortgage foreclosure and learning that it was caused by FAF's assignment to the Bachrans, Bell stopped paying interest on the agreement on September 1, 1983, and thereafter paid only the lease rent and real property taxes. Also, Bell did not pay the agreement in full on March 1, 1984.

Bell answered the complaint and filed a cross-claim for damages against FAF, Figge, Hill, and the Bachrans, charging that their acts had jeopardized her position as a buyer and that they had breached the agreement. She did not specify those acts. The Bachrans answered Bell's cross-claim and later filed their own cross-claim against her alleging that she had defaulted on the agreement by failing to make the monthly payments after September 1, 1983, and to pay the balance due on March 1, 1984. The Bachrans prayed alternatively for cancellation of the agreement and forfeiture of Bell's payments, or for foreclosure and sale of the property. They also asked for a judgment against Bell for any deficiency between the net proceeds of the sale and the balance due on the agreement. The Bachrans also filed a third-party complaint against Stromer seeking the same relief on the ground that under the agreement Stromer remained liable for Bell's default. Stromer was served with process through the acting director of the Department of Commerce and Consumer Affairs, and notice was sent to him by mail. Stromer answered the Bachrans' third-party complaint with a general denial.

Bell answered the Bachrans' complaint alleging, inter alia, that the Bachrans' actions had caused California Federal to foreclose the mortgage, thus, jeopardizing Bell's interest in the apartment. She also cross-claimed against the Bachrans on the latter ground and requested rescission of the agreement of sale. The Bachrans thereafter answered Bell's cross-claim.

Before trial, Bell filed a motion to amend her answer to the Bachrans' cross-claim to add the defense that the agreement and the assignment were executed in California and her liability should be determined by California law, which prohibits a deficiency judgment in foreclosure cases. Trial was held on August 8, 1985, 1 at which time the evidence showed that all parties to the agreement and its assignment were domiciled in California and the documents were signed in that state. Bell's motion to amend was heard after the trial, and although she was allowed to amend her answer, the trial court ruled that Hawaii law governed the agreement.

On September 10, 1985, the trial court entered findings of fact and conclusions of law, holding that the mortgage was in default, and entered a decree foreclosing the mortgage and sale of the property by a commissioner (commissioner) appointed for that purpose. 2

In separate findings of fact and conclusions of law entered on October 22, 1985, the trial court held, inter alia, that Bell was in default on the agreement and that she and Stromer were jointly and severally liable to the Bachrans. The trial court also held that Bell was not entitled to rescind the agreement, or to a set-off against the Bachrans of damages she allegedly incurred as a result of the foreclosures. The trial court ordered foreclosure of the agreement and sale of the apartment by the commissioner. The trial court also specifically held that if the proceeds of the sale were insufficient to pay all the valid claims in the action, a judgment would be entered for the deficiency. Appellants jointly filed a notice of appeal on November 20, 1985.

On December 23, 1985, the order approving the commissioner's report, confirming the sale of the apartment, and directing distribution of the proceeds was entered. The order also provided:

AND IT IS FURTHER ORDERED, ADJUDGED AND DECREED that Defendants Bachran have and may recover from NORMA ROSALINDE BELL and PETER ROBERT STROMER, who are jointly and severally liable for the deficiency due Defendants Bachran as of the date of closing, computed as aforesaid and as may be subsequently determined by ths [sic] Court, plus interest as provided by law until paid from the date of closing, and that a deficiency judgment for said sums shall be entered herein in favor of Defendants Bachran and against Defendants Bell and Stromer upon filing of an appropriate affidavit or Motion therefor by Defendants Bachran and that Defendants Bachran have execution thereon against said Defendants Bell and Stromer according to law upon the Deficiency Judgment being filed with...

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