First Hawaiian Bank v. Powers

• Decision Date: 30 March 2000
• Docket Number: No. 21627.,21627.
• Citation: 998 P.2d 55,93 Haw. 174
• Parties: FIRST HAWAIIAN BANK, a Hawai`i corporation, Plaintiff-Appellee, v. Clarence A. POWERS, Jr., Defendant-Appellant.
• Court: Hawaii Court of Appeals

998 P.2d 55

93 Haw. 174

FIRST HAWAIIAN BANK, a Hawai`i corporation, Plaintiff-Appellee, v. Clarence A. POWERS, Jr., Defendant-Appellant.

No. 21627.

Intermediate Court of Appeals of Hawai`i.

March 30, 2000.

As Amended April 3, 2000.

Clarence A. Powers, Jr., on the briefs, defendant-appellant, pro se.

Leslie C. Togioka and Steven T. Osa, on the briefs, Honolulu, for plaintiff-appellee.

WATANABE, ACOBA, and LIM, JJ.

Opinion of the Court by WATANABE, J.

The lawsuit which spawned this appeal was brought by Plaintiff-Appellee First Hawaiian Bank (FHB) to collect the amount allegedly owed by Defendant-Appellant Clarence A. Powers, Jr. (Clarence) under an automobile credit sale contract. Although Clarence (1) filed a written answer generally denying the allegations in FHB's complaint; (2) filed six separate motions to dismiss the complaint on grounds that the applicable statute of limitations had elapsed, the complaint was time-barred, and the complaint did not state a legitimate claim for relief; and (3) returned to Hawai`i from his mainland home several times to attend various pre-trial hearings, the District Court of the First Circuit (the district court) entered a default against Clarence when he allegedly failed to appear at a July 17, 1997 pre-trial conference. Subsequently, the district court granted FHB's non-hearing motion for default judgment against Clarence for $9,021.95 and then denied Clarence's motion to set aside the default judgment.

On appeal, Clarence contends that the district court abused its discretion when it refused to set aside the default judgment. Clarence also maintains that the district court was wrong to have denied his motions to dismiss the complaint against him.

We agree with Clarence.

BACKGROUND

On March 23, 1990, Clarence purchased a used 1985 Volkswagen Jetta (the car) from Ala Moana Porsche Audi VW (Ala Moana VW) for $7,265.80. Clarence paid $700.00 in cash as a down payment and received a credit against the purchase price for $1,500.00, the net value of the 1978 Volkswagen Scirocco that he traded in to Ala Moana VW as part of the purchase. To finance the balance of the purchase price, as well as the cost of license plate fees and insurance premiums, Clarence entered into a Credit Sale Contract with FHB (the contract), pursuant to which he borrowed the principal amount of $6,445.41 from FHB, agreed to pay interest at a fixed annual rate of 16.50 percent per year on the decreasing unpaid principal balance, and promised to repay FHB for the loan and finance charges in thirty-six monthly installments of $228.20.

Among the terms and conditions of the contract was the following:

NO TRANSFER OF YOUR CAR. You will not sell or transfer your car or abandon it or remove it from the island in Hawaii [Hawai`i] where you first keep it without our written permission.

Clarence asserts that, in accordance with the foregoing provision, he contacted FHB in October 1990 to request permission to move the car to San Francisco, California because his job required him to relocate there. Clarence claims that he did not receive a response from FHB prior to his departure from Hawai`i. However, on January 16, 1991, FHB informed him that "he could not remove [the car] from the island and requested [the car] be returned to satisfy the note." Consequently, Clarence, through a friend, voluntarily surrendered the car to FHB on January 19, 1991.

On January 23, 1991, FHB sent a letter to Clarence at a Union City, California address, informing him, in relevant part, as follows:

[The car] above was voluntarily surrendered.

At this time, you need to keep in mind these three points.

First, if you want to recover [the car], you must contact the Collection Officer at (808) 943-4539 and pay [FHB] the Total Amount Due before we sell [the car]. The Total Amount Due is the Net Payoff Balance shown above,¹ plus any interest on the loan accrued at the time you pay [FHB], plus any expenses we have incurred to repossess and sell [the car] and to prepare [the car] for sale.

Second, if you do not take this first step, [FHB] will be forced to sell [the car]. If the sale amount is less than the Total Amount Due at that time, you will still owe the bank the difference. On the other hand, if the amount is more than the Total Amount Due at that time, you will be entitled to that surplus. The bank may sell [the car] at any time after February 6, 1991.

Third, please contact the Collection Officer at (808) 943-4539 within 30 days from the date of this letter to claim any personal property (if any) that was in [the car] at the time of repossession. Personal property will be disposed of if unclaimed after 30 days.

(Footnote added.)

According to FHB, it sold the car for $2,000.00 on April 18, 1991 at a private auction for automobile wholesalers and retailers. Thereafter, it sent a letter dated April 23, 1991 to Clarence, informing him that the amount received from the sale of the car was insufficient to cover the amount owed to FHB, and notifying him of the deficiency balance still owed to FHB.

Clarence denies receiving such a letter, and no copy of such a letter exists in the record on appeal. According to Clarence, the first correspondence he received from FHB after the January 23, 1991 letter was a letter dated May 31, 1996. The substance of that May 31, 1996 letter, which was signed by Claire Nagai, FHB Collection Representative, was as follows:

Re: ACCOUNT NO. 71477968 ACCOUNT BALANCE: $6642.09 Dear Mr. Powers Jr.

For some time, we have refrained from writing you regarding your indebtedness to [FHB]. We have done so in the belief that just as soon as you were in a position to resume payments on this obligation, you would do so.

Please remember, we are trying to help you, as well as ourselves, and are willing to accept payments according to your current ability to pay.

Could you start a repayment schedule now? Even if it is not as much as you would like to send, every bit helps.

Write or call today and let us know what we can do to help us both. We are enclosing a pre-addressed envelope for your convenience. Thank you.

On June 20, 1996, Clarence responded to the foregoing letter stating, in relevant part:

In 1990 [FHB] demanded repossession of my 1985 Volkswagen Jetta. In fact it was returned to [FHB] October/November in 1990. It was parked at the direction of [FHB] in Kapiolani [Kapi`olani] Garage location.

I recieved [sic] no further communication in the next 5 and one half years.

I do not understand why [FHB] thinks there is a deficiency now owing, it would seem whatever [FHB] would have had in 1990 are barred by the passage of time.

I would be interested to know what you claim to be the outstanding balance then when the car was returned to [FHB]; what it's [sic] fair market value was, and what you did with it? I await your response.

(Emphasis in original.)

By a letter dated June 24, 1996, FHB responded to Clarence's inquiry by informing Clarence that the car was placed for sale after February 6, 1991 and sold for $2,000.00 on April 18, 1991, that the outstanding balance after the sale amounted to $3,922.38, and that "[t]he current balance with the accrued interest as of June 24, 1996 totals $6,679.29."

PROCEDURAL HISTORY

On July 16, 1996, approximately five years and six months after Clarence had surrendered the car to FHB and about five years and two months after FHB claims to have notified Clarence that it sold the car at auction, FHB filed the underlying complaint against Clarence in the district court. In the complaint, FHB alleged that as of July 10, 1991, "the last date of indebtedness," Defendant owed FHB the amount of $3,427.96. FHB also alleged that Clarence owed FHB 1,831 days of interest at a 16.50 percent annual or $1.55 daily interest rate, for a total of $2,838.05. Finally, FHB requested attorney's fees and other costs. On August 20, 1996, FHB's attorney filed in the district court a "Proof of Service," attesting that the complaint was served by certified mail on Clarence in Alameda, California on August 16, 1996.

The summons attached to the complaint informed Clarence that he was required

to appear before the District Judge of the First Circuit, Honolulu Division, at his/her Court Room 10B in Honolulu, at 1:30 o'clock p.m., on the second Monday following the date of service, and should such Monday be a legal holiday, then upon the next day.

The summons further notified Clarence:

IF YOU OR YOUR ATTORNEY FAIL TO ATTEND AT THE TIME AND PLACE DESIGNATED, DEFAULT AND DEFAULT JUDGMENT WILL BE TAKEN AGAINST YOU FOR THE RELIEF DEMANDED IN THE COMPLAINT.

On August 26, 1996, the second Monday after he was served, Clarence, through attorney Lloyd Asato (Asato), appeared in the district court, as required by the summons, and orally entered a general denial to the complaint. The district court's docket reveals that because FHB's attorney was not present, the case was continued and a pretrial conference was set for 11:00 a.m. on November 4, 1996. On September 6, 1996, Clarence filed a written answer to FHB's complaint, which he signed "PRO PER." The answer generally denied the allegations set forth in the complaint and also alleged four affirmative defenses, among them the following:

As a third and separate affirmative defense, all claims against [Clarence] are barred in whole or in part to the extent that [FHB] did not file or commence its action within the Statute of Limitations under the [Hawai`i] Uniform Commercial Code [ (UCC) ]: 490:2-725....

Eleven days later, on September 17, 1996, Asato officially withdrew as counsel for Clarence.

Prior to the scheduled pre-trial conference on November 4, 1996, Clarence filed three separate motions to dismiss, dated October 3, October 29, and November 4, 1996, respectively. These motions were substantially similar in substance and argued that: (1) the district court lacked subject matter jurisdiction over Clarence's complaint because the applicable statute...