City and County of Honolulu v. Kam

• Decision Date: 25 May 1965
• Docket Number: No. 4360,4360
• Parties: CITY AND COUNTY OF HONOLULU, a municipal corporation, v. William K. KAM, Executor of the Estate of Tam See, Deceased.
• Court: Hawaii Supreme Court

Page 683

402 P.2d 683

48 Haw. 349

CITY AND COUNTY OF HONOLULU, a municipal corporation, v. William K. KAM, Executor of the Estate of Tam See, Deceased.

No. 4360.

Supreme Court of Hawai'i.

May 25, 1965.

Syllabus by the Court

1. Where a contract contains no provision as to the time for performance, a reasonable time is implied, to be determined upon consideration of the subject matter of the contract, the situation of the parties, what was contemplated at the time the contract was made, and other surrounding circumstances.

2. Interest allowed on a contractual obligation by R.L.H.1955, § 191-1, is also contractual, not by way of damages.

3. Though payment of a sum of money has been prevented by a garnishment, this is an incomplete defense to a claim for interest when the interest is contractual in nature. It must further be shown that the garnishee has not enjoyed the use of the money for which he expressly or impliedly promised to pay interest. However, a deposit in court is not the only way that a garnishee can show that he did not enjoy the use of the money.

4. This State follows the general rule that partial payments on an indebtedness carrying contractual interest will be applied first to the satisfaction of interest due and if, after the payment of interest there is a surplus remaining, then such surplus is applied to principal and the interest thereafter computed upon the remaining balance of principal. To this rule there are exceptions which derive from the intent of the parties as to the application of the payments.

Richard Y. C. Au, Deputy Corp. Counsel, City and County of Honolulu, Stanley Ling, Corp. Counsel, for appellant.

Sai Chow Doo, Honolulu, for respondent.

Before TSUKIYAMA, C. J., and CASSIDY, WIRTZ, LEWIS and MIZUHA, JJ.

LEWIS, Justice.

This is a specific performance suit, filed on February 17, 1960, to secure the carrying out of a compromise agreement between plaintiff and defendant's decedent, which was made in 1955 in settlement of an eminent domain proceeding, as set out in Trask v. Kam, 44 Haw. 10, 15-16, 352 P.2d 320, 324, 88 A.L.R.2d 1. Plaintiff hereinafter is referred to as the 'City,' and defendant sometimes is referred to as the 'landowner.' ¹ Both parties have appealed from the judgment.

The making of the compromise agreement is not contested, nor is that portion of the judgment which requires that defendant execute a deed conveying the two parcels of land involved. ² The issue is the amount of interest due, if any, under the circumstances hereinafter set out. Defendant filed a counterclaim for the interest.

The claim for interest was based on R.L.H.1955, § 191-1. ³ The City contests the applicability of the statute, contending that the $38,000, which was to be paid for the two parcels of land, had not become 'due' within the meaning of the statute. And under general principles the garnishment prevented the accrual of interest, according to the City's contentions. The landowner supports the ruling of the court below that interest ran from March 10, 1955, but contends that the court erred when it suspended the running of interest on a part of the debt from the date of garnishment, June 22, 1955, it being the landowner's contention that a garnishment does not of itself suspend the running of interest, and that a deposit in court of the money due was required if the garnishment was to have that effect. The landowner further contends that the court erred in the computation of the interest.

The garnishment above referred to was sued out by Arthur K. Trask, the landowner's former attorney, who on March 21, 1955 brought suit for his fees, as set out in Trask v. Kam, supra, 44 Haw. 10, 352 P.2d 320. ⁴ What transpired in that suit must be considered in connection with the steps taken to arrive at and consummate the compromise agreement here involved. for an understanding of the present case.

It was on March 10, 1955 that the landowner responded to the City's offer of $38,000.00 as full compensation, made on September 27, 1954 by Resolution No. 625 of the Board of Supervisors, as the City Council formerly was called. It is questionable whether March 10, 1955 would be deemed the date when the contract between the City and the landowner was made, if the question was before us. A reply after a lapse of nearly six months ordinarily would not be deemed to constitute acceptance of the City's offer within a reasonable time. Moreover, the letter of March 10, 1955, which the landowner wrote without the assistance of her attorney and behind his back, ⁵ asked that the City 'have a deed drawn for my signature.' The method of effectuating the compromise had not previously been specified. But whether or not this constituted a material deviation in terms so as to be deemed a counteroffer for that reason, and irrespective of the landowner's delay in replying to the City's offer, both parties have treated the contract as made on March 10, 1955. We accordingly consider the matter in that light.

The landowner's letter of March 10, 1955 was addressed to the City's Chief Engineer, and had to be transmitted to the Board of Supervisors. This was done on March 22, 1955. On March 29, 1955, the Board of Supervisors adopted Public Works Committee Report No. 1154, reciting that the landowner had accepted $38,000.00 as full compensation, and had requested that a deed be prepared for her signature to complete the transaction. It referred the preparation of the deed to the City and County Attorney, ⁶ as the Corporation Counsel then was called, and directed that the landowner be informed of the Board's action. The $38,000.00 already had been appropriated.

As was conceded in this court, the City for many years had had possession of the two parcels of land involved in the eminent domain proceeding, and had already improved them for road purposes and put them to public use. Moreover, the City already had obtained a final order of condemnation and the appeal from the judgment on which it was based ⁷ necessarily would be abandoned under the terms of the compromise agreement. ⁸ Upon recording of the final order of condemnation title would pass to the City pursuant to R.L.H.1955, § 8-24. The appeal, which took the form of an application for and the obtaining of a writ of error under R.L.H.1955, c. 212, had not abrogated the judgment or final order of condemnation based thereon. Bertelmann v. Kaio, 23 Haw. 646. While it of course must be borne in mind that the parties agreed that a deed would be given, and indeed, the record shows that the form of deed eventually agreed upon was a warranty deed, it nevertheless is part of the background of the contract that the property was under final order of condemnation. This final order was upon a nominal award of $1.00 which the landowner sought to increase. That was the gist of the matter. When the City agreed to pay $38,000.00 it, to all intents and purposes, already had received the quid pro quo.

The landowner's rights were integrated in the contract made on March 10, 1955, so that the statutory and case law generally applicable in determining the right to interest when property is the subject of eminent domain proceedings ⁹ does not directly apply. Cf., Albrecht v. United States, 329 U.S. 599, 67 S.Ct. 606, 91 L.Ed. 532. It is R.L.H.1955, § 191-1, relating to interest on money due on an 'instrument of writing' ¹⁰ which applies. However, the circumstances above set out are pertinent in determining when, under the compromise agreement, the money was to be paid. In that same connection it is noteworthy that the City's attorney was to draw the deed, whereas in the usual case the seller would be responsible for the preparation of the deed.

While the compromise agreement fixed $38,000.00 as the complete amount to be paid, it was contemplated that the matter would be wound up promptly. This appears from Public Works Committee Report No. 3082, ¹¹ which was the basis of Resolution No. 625, adopted September 27, 1954, making the $38,000.00 offer. We conclude that it was the obligation of the City to pay the agreed amount within a reasonable time. Applicable here is the rule that, where there is no provision as to the time for performance, a reasonable time is implied, to be determined upon consideration of the subject matter of the contract, the situation of the parties, what was contemplated at the time the contract was made, and other surrounding circumstances. Castle v. Smith, 17 Haw. 32, 35; Magnin v. Furgie, 4 Haw. 467, 470; 17 Am.Jur.2d, Contracts, §§ 329, 330.

We have here a question of interest on a contractual obligation. Such interest, allowed by section 191-1, is also contractual, not by way of damages. Cf., Bolles v. Unna, 3 Haw. 397; Tagawa v. Trustee in Dissolution Sumitomo Bank, 43 Haw. 1, 11-12. This falls under the general rule that the existing law is part of a contract where there is no stipulation to the contrary. 17 Am.Jur.2d, Contracts, § 257; 17A C.J.S. Contracts § 330. Since the contract was to pay $38,000.00 within a reasonable time the money became 'due' after the lapse of a reasonable time, and under the terms of R.L.H.1955, § 191-1, which must be considered part of the contract, interest was to apply thereafter.

What was a reasonable time for consummation of the compromise? The City was to prepare the deed, but the work required in that connection was negligible. However, the issuance of a warrant by a governmental body requires certain procedures for which time has to be allowed. R.L.H.1955, § 8-23, by its terms provides for 30 days without interest in which to pay a final judgment in eminent domain, ¹² and we regard this as some index of the time required to process such a matter to payment.

On May 11, 1955, the landowner's then attorney wrote the City's attorney enclosing forms of documents (a deed and a general release), and stating that executed originals would be delivered contemporaneously with the receipt of an auditor's...