KNG CORP. v. Kim, 25038.
| Decision Date | 01 April 2005 |
| Docket Number | No. 25038.,25038. |
| Citation | 107 Haw. 73,110 P.3d 397 |
| Parties | KNG CORPORATION, Plaintiff-Appellee v. Carol KIM and Polo Trading, Inc., Defendants-Appellants. |
| Court | Hawaii Supreme Court |
Gary Victor Dubin, Honolulu, for defendants-appellants.
Carolyn Schnack (Paul M. Dold on the brief), for plaintiff-appellee.
Dorothy Sellers, Deputy Attorney General, on the brief, for Amicus Curiae State of Hawai'i.
MOON, C.J., LEVINSON, NAKAYAMA, ACOBA, JJ., and Intermediate Court of Appeals Chief Judge BURNS, assigned by reason of vacancy.
We hold that, before ordering that a rent trust fund pursuant to Hawai'i Revised Statutes (HRS) § 666-21 (1993) be established, the district court of the first circuit (the court) should have held a hearing on the claim of Defendant-Appellant Carol Kim (Defendant), as tenant of outdoor spaces rented to her by Plaintiff-Appellee KNG Corporation (Plaintiff), that she was not allowed to take possession of the said spaces. Because we remand the case, we conclude, for guidance of the court, that HRS § 666-21 does not violate the due process and equal protection clauses of the state and federal constitutions.
On October 12, 2001, Defendant, as President of Defendant-Appellant Polo Trading, Inc., entered into a commercial license agreement with KNG to purchase two vending carts1 and sublease eight twenty-five-square-foot spaces for an outdoor vending cart operation.2 The scheduled lease term affecting two of the carts was from November 15, 2001 to November 14, 2004; the scheduled lease term affecting the other six carts was from December 15, 2001 to November 30, 2004.3
Defendant allegedly paid to Plaintiff $48,000 as a premium for the outdoor spaces (the property), $21,000 to purchase the two existing carts, a security deposit of $20,833.20, and the initial month's rent of $18,229. A dispute arose as to the location of six of the carts and Defendant claims she was never given occupancy of the property.
On February 12, 2002, Plaintiff filed a complaint requesting $44,270.45 in unpaid rent and general excise taxes, a judgment giving Plaintiff possession of the property, and a writ of possession directing the sheriff or police officer to: (1) remove Defendant(s) from the property and all persons possessing the property through Defendant(s); (2) remove from the property all personal belongings of Defendant(s) and of any other person; and (3) put Plaintiff in possession of the property.
On the return date of the summons, February 25, 2002, Defendant entered a general denial to the complaint, the Honorable Judge David F. Fong presiding. At the hearing, Plaintiff orally moved for the establishment of a rent trust fund pursuant to HRS § 666-21 (1993). Defendant responded that the request should be done by written motion and that possession of the property had never been provided to Defendant, but the court granted the motion:
(Emphasis added.)
The court ordered Defendant to deposit $20,833.29 into the rent trust fund by 4:00 p.m. on March 1, 2002 and by the first of each month thereafter until the dispute was concluded. The parties were to convene again on March 4, 2002 for a pre-trial hearing.
At the pre-trial hearing on March 4, 2002, Plaintiff's counsel stated that Defendant had failed to submit the monies into the rent trust fund and requested that the judgment for and writ of possession be issued effective that day. Defense counsel confirmed that payment had not been made and asserted that the establishment of the rent trust fund without a hearing was unconstitutional. The defense also indicated that an appeal with respect to the order of a rent trust fund would be filed, along with a demand for a jury trial with respect to damages.4 The court apparently granted Plaintiff's request for writ of possession. On March 5, 2002, pursuant to HRS § 666-11 (1993),5 the court entered a judgment for possession and a writ of possession in Plaintiff's favor.
Defendant appealed on April 4, 2002 from 1) the judgment for possession, and 2) the writ of possession.
Defendant claims that HRS § 666-21 violates the due process clause of section I of the Fourteenth Amendment to the United States Constitution6 and/or article I, section 5 of the Hawai'i State Constitution7 in that it requires, as a precondition for trial, the payment of rent into a trust fund without (1) proof of any rent default, (2) prior notice and hearing, and (3) the posting of a bond by Plaintiff. Defendant further argues that the court failed to ascertain whether rent was actually owed and that HRS § 661-21 violates equal protection because it discriminates between renters who can afford rent trust fund deposits and those who cannot.
Initially, Plaintiff argues that Defendant's challenge to the court's grant of summary possession is moot because (1) Defendant asserted she was never in possession of the premises, (2) Defendant did not file a motion to stay the writ of possession or a motion for reconsideration, and (3) the writ of possession has been issued and executed. Plaintiff also contends that the court's action was constitutional because the rational basis test applies to HRS § 666-21 and the rational basis test is satisfied.
The Attorney General for the State of Hawai'i submitted an amicus curiae brief. The position of the State is that (1) the Hawai`i appellate courts lack jurisdiction because of untimeliness of the appeal; (2) in this case, the exception announced in Forgay v. Conrad, 47 U.S. (6 How.) 201, 12 L.Ed. 404 (1848) [hereinafter Forgay doctrine], permits an order for payment into a rent trust fund; (3) the case is moot because execution of the writ of possession has ousted Defendant; and (4) HRS § 666-21 is constitutionally valid.
As mentioned, the State first maintains that Defendant's appeal is untimely because the April 4, 2002 notice of appeal was not filed within thirty days of the "February 25, 2002 [rent trust fund] order." However, there is no February 25, 2002 rent trust fund order—there is merely the February 25, 2002 oral decision by the district judge. The oral decision is not an appealable order. See HRAP 4(a)(1) (); HRAP 4(a)(5) (). In civil cases before the district court, "[t]he filing of the judgment in the office of the clerk constitutes the entry of the judgment; and the judgment is not effective before such entry." District Court Rules of Civil Procedure Rule 58. See Hawai`i Rules of Civil Procedure Rule 58. As such, the February 25, 2002 oral decision regarding the rent trust fund is an interlocutory decision in the summary possession case that is reviewable on appeal from the judgment for possession. See Pioneer Mill Co. v. Ward, 34 Haw. 686, 694 (1938) ().
The State further contends that the Forgay doctrine does not provide a jurisdictional basis for this appeal because Defendant is appealing the February 25, 2002 rent trust fund decision and the Forgay doctrine does not apply to transfers of monies into a court fund. "The Forgay doctrine is an exception to the finality requirement for appeals and it allows an appellant to immediately appeal a judgment for execution upon property, even if all claims of the parties have not been finally resolved." Ciesla v. Reddish, 78 Hawai`i 18, 20, 889 P.2d 702, 704 (1995). "Under the Forgay-Conrad rule, the lower court's order is treated as final for appeal purposes where the losing party would be subject to irreparable injury if appellate review had to await the final outcome of the litigation." Bank of Hawaii v. Davis Radio Sales & Serv., Inc., 6 Haw.App. 469, 475 n. 10, 727 P.2d 419, 424 n. 10 (1986).
The State asserts that the Forgay doctrine should not be applied to the termination of a leasehold interest in commercial property because Defendant has an adequate remedy in money damages and, hence, there is no irreparable injury. However, the seminal Hawai`i case on the Forgay doctrine, Penn v. Transp. Lease Hawaii, Ltd., 2 Haw.App. 272, 630 P.2d 646 (1981), involved termination of a leasehold interest in automobiles that was held to be appealable under Forgay.
Plaintiff and the State finally contend that this appeal is moot because the writ of possession was executed and Defendant is not in possession of the subject premises. However, the agreement gave Defendant possession until November 14, 2004, with "one 3-year option to renew." See Exit Co. Ltd. P'ship v. Airlines Capital Corp., Inc., 7 Haw.App. 363, 366, 766 P.2d 129, 131 (1988)
(). Hence, because there was an option to renew, this court has jurisdiction to review the case.8
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