Lynch v. Blake
| Decision Date | 10 May 1978 |
| Docket Number | No. 6000,6000 |
| Citation | 579 P.2d 99,59 Haw. 189 |
| Court | Hawaii Supreme Court |
| Parties | Paul A. LYNCH, Trustee, Plaintiff-Appellant, v. Lloyd V. BLAKE, John H. Brame, W. Guy Cobb, Thomas E. Collins, Leroy Crandall, Creditors and Stockholders of Kona Coast Development Corporation, Gerald M. and Gladys L. Desserey, Russell S. Ellsworth, William J. Ferrin, Stanley R. Gould, Harl H. Haas, Evon L. (Mike) Hammer, Philip T. Hanna, Stephen T. Harada, Douglas W. Howden, Lewis B. Kean, John (Jack) H. Kelly, III, Kona Coast Development Company, a Delaware Corporation, T. Lamphier, John G. Lane, Kenneth Leeds, Chancy M. Lott, Mariner's Travel & Tour, a business entity, Harold C. Marlowe, Anne H. Materna, William McKerracher, Grant McNiff, John A. Messerschmitt, John T. Moss, Luman N. Nevels, Jr., Clarence H. Niebuhr, Earl Ninow, M. D., E. R. Noonan, Jr., Byron Palmer, Robert C. and Ann Platt, William D. Redhead, John F. Reed, J. E. Sanborn, Joseph E. Scallon, M. D., Robert T. Seidlitz, Sheraton Hotels, a corporation, John R. Skidmore, V. Sneed, Mark E. Speer, Wilbur Quint, as Executor of the Estate of Gretchen Stansbury, and Western Union International, Inc., a corporation, Defendants, and William J. Ferrin and Luman N. Nevels, Jr., Defendants-Appellees. Luman N. NEVELS, Jr., Plaintiff-Appellee, v. KONA COAST DEVELOPMENT CORPORATION, and the Creditors and Stockholders of Kona Coast Development Corporation, Defendants, and Lewis B. Kean, Trustee for the Creditors and Stockholders of Kona Coast Development Corporation, Defendant-Appellant. |
Syllabus by the Court
1. When the facts support a finding that a foreign corporation has transacted business within the state within the meaning of HRS § 634-71(a)(1), the Director of the Department of Regulatory Agencies, pursuant to HRS § 634-69 is authorized to receive service of process on behalf of the foreign corporation.
HRS § 634-71(b), under the facts herein, is not in conflict with HRS § 418-14.
2. A general assignment for the benefit of creditors creates an express trust in which legal title passes to the assignee as trustee. The creditors, and in this case, stockholders also, are the beneficiaries, as cestuis que trustent.
3. Service of process on a trustee does not constitute service of process on the creditors and stockholders absent a showing that the trustee was duly authorized to receive service of process on behalf of the creditors and stockholders for personal liability.
4. "It is elementary law that a judgment binding on the person of the defendant may not be rendered in an action classified as in personam without some form of personal service sufficient to satisfy the requirements of due process of law."
5. Service of process on persons who are not agents or trustees of a foreign corporation to accept service of process does not constitute proper service and the trial court lacked jurisdiction to grant judgment against the foreign corporation.
6. Unless the trust instrument or the law provides otherwise, a general assignment for the benefit of creditors entitled each creditor to share pro rata in the dividends.
7. Valid service of process upon the trustee of an express trust brings the res of the trust under the jurisdiction of the trial court.
Ronald W. K. Yee, Honolulu (Case, Stack, Kay, Clause & Lynch, Honolulu, of counsel), for appellants, Lewis B. Kean and Paul A. Lynch.
Tom C. Leuteneker, Hilo (Carlsmith, Carlsmith, Wichman & Case, Hilo, of counsel), for appellee, William J. Ferrin.
Jason F. Oliver, Honolulu, for appellee, Luman N. Nevels, Jr.
Before RICHARDSON, C. J., and KOBAYASHI, OGATA, MENOR and KIDWELL, JJ.
Paul A. Lynch, in his capacity as trustee (hereinafter Lynch), and Lewis B. Kean (Kean), in his capacity as trustee for the Creditors and Stockholders of Kona Coast Development Corporation (KCDC), collectively appeal the judgment of the trial court, in Civil Nos. 2455 and 2497, consolidated for hearing, awarding money damages to appellees, Luman N. Nevels, Jr. (Nevels) and William J. Ferrin (Ferrin). The trial court rendered judgment in favor of Nevels and Ferrin against KCDC and also granted judgment in favor of Nevels against the creditors and stockholders of KCDC. The trial court further concluded that each of these judgments was to be paid out of the gross proceeds of the sale of that parcel of real property known as Ooma II, dated November 17, 1972, between Lynch and King Corporation, prior to payment to any other creditors and stockholders of KCDC.
We affirm in part, reverse in part and remand for further proceedings as stated hereinafter.
1. Whether the trial court had jurisdiction to consider the claims of Nevels and Ferrin against KCDC and/or the Creditors and Stockholders of KCDC and award them judgment against KCDC and/or the Creditors and Stockholders of KCDC.
2. Whether the trial court erred in declaring that Nevels and Ferrin are entitled to satisfaction of their judgments out of the monies to be received by Kean for the benefit of all the creditors and stockholders of KCDC prior to payment to any other creditors and stockholders of KCDC.
3. Whether the court had jurisdiction or authority to order the payment to Kean of 12% of the gross proceeds from the sale of Ooma II.
Civil No. 2455, Lynch v. Blake, et al., a suit to remove cloud from title, was filed by Lynch on April 16, 1971. The defendants in Civil No. 2455 included KCDC, a foreign corporation, the creditors and stockholders of KCDC, Nevels, Ferrin, Kean, each individual who had at any time been an officer of KCDC, Harl Haas (KCDC's last known agent), and each known creditor or contributor to KCDC. The complaint identified the creditors and stockholders of KCDC as including persons known and unknown to the plaintiff. Except as to Nevels and Ferrin, who filed answers, the trial court granted Lynch a default judgment against each of the defendants.
In addition to his answer in Civil No. 2455, Ferrin filed a counterclaim and cross-claim. Ferrin served his claims on Lynch, as attorney for the Plaintiff in Civil No. 2455, but did not effect service of his claims upon KCDC. Ferrin alleged he was owed $4048.48 for legal work he had done on behalf of KCDC. In addition to his answer in Civil No. 2455, Nevels filed Civil No. 2497, Nevels v. Kona Coast Development Corporation, also naming the Creditors and Stockholders of KCDC as party defendants. Nevels claimed he was owed $30,491.31, together with interest, since he had repaid a loan made to KCDC by Stephen Harada. Nevels had signed the promissory note on October 11, 1967. When the note became due KCDC defaulted and during the period January 31, 1969 to September 25, 1969, Nevels made good KCDC's obligation to Harada. Pursuant to an order of the trial court, Nevels effected service upon the creditors and stockholders of KCDC by mailing a certified copy of the complaint and attached documents to Kean, as Trustee for the creditors and stockholders of KCDC. Nevels served KCDC by leaving a certified copy of the complaint and attached papers with the Department of Regulatory Agencies.
Civil Nos. 2455 and 2497 were informally consolidated for purposes of trial and submitted to the trial court upon stipulated facts, a stipulated list of exhibits, and written argument. On January 7, 1975, the trial court filed its Findings of Fact and Conclusions of Law. The court adopted the facts as stipulated by the parties and amended from $4048.48 to $4098.48 the value of the legal services provided by Ferrin. The court also found that all of the exhibits stipulated to by the parties were " . . . true copies of authentic documents, the existence and contents of which are true fact." With respect to the issues before this court on appeal, the trial court concluded inter alia that:
1. It had jurisdiction over the parties including the Creditors and Stockholders of Kona Coast Development Corporation and over the subject matter of the claims presented in the pleadings in Civil No. 2455.
2. It had jurisdiction in Civil No. 2497 over KCDC and Lewis B. Kean as Trustee for the Stockholders and Creditors of KCDC and over the subject matter of the claim for satisfaction against the real property known as Ooma II.
3. The rights to purchase Ooma II under an agreement between the Kamitaki Trustees and Royal Hawaiian Management Corporation (RHMC) were lawfully assigned to KCDC by that unrecorded Agreement and Assignment dated May 27, 1967, by and between RHMC and KCDC.
4. Said rights were subsequently transferred and vested in Nevels as Trustee by that Assignment dated September 27, 1967.
5. Said rights were subsequently transferred and vested in the Creditors and Stockholders of KCDC by that Assignment 6. Lynch holds title to Ooma II as Trustee under the terms of the Lynch Trust, dated October 29, 1968. Under the terms of said Trust, Kean holds a 12% beneficial interest in said Trust.
and Resignation dated January 17, 1968.
7. Kean holds said 12% undivided beneficial interest as Trustee for the benefit of all the Creditors and Stockholders of KCDC.
8. Luman N. Nevels, Jr., Plaintiff in Civil No. 2497, shall have judgment against Kona Coast Development Corporation and the Creditors and Stockholders of Kona Coast Developers Corporation. There is no dispute that the money was paid by the Plaintiff as an accommodation endorser upon the note of KCDC. Judgment will be in the sum of $30,491.31 together with interest thereon at the statutory rate of 6% from and after September 25, 1969. The judgment shall also include costs and attorney's commission.
9. William J. Ferrin shall have judgment against Kona Coast Development Corporation for $4,098.48, together with interest at the 6% statutory rate from August 15, 1967, plus costs and attorney's commissions.
10. Luman N. Nevels, Jr. and William J. Ferrin shall be paid out of the proceeds of the Agreement of Sale of Ooma II dated November 17, 1972, between ...
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82 Hawai'i 405, Romero v. Star Markets, Ltd.
...as in personam without some form of personal service sufficient to satisfy the requirements of due process of law." Lynch v. Blake, 59 Haw. 189, 204, 579 P.2d 99, 108 (1978) (citation and quotation marks omitted). The basis for this fundamental precept is "in Anglo-American jurisprudence ........