S. Utsunomiya Enterprises, Inc. v. Moomuku Country Club

• Decision Date: 19 January 1994
• Docket Number: No. 16751,16751
• Citation: 75 Haw. 480,866 P.2d 951
• Parties: S. UTSUNOMIYA ENTERPRISES, INC., a Hawai'i corporation, Plaintiff/Third-Party Plaintiff, v. MOOMUKU COUNTRY CLUB, a Hawai'i partnership, Chuck Maples and Les Hirahara, Defendants/Third-Party Plaintiffs-Appellants, and James L. Watson, D.D.S., Defendant, and Terry S. Hand, dba Hand Properties; Mary Anne Bruno and Akie Yoshikawa, Third-Party Defendants, and Japan Grand Prix (Hawai'i), Ltd., Intervenor-Appellee.
• Court: Hawaii Supreme Court

Page 951

866 P.2d 951

75 Haw. 480

S. UTSUNOMIYA ENTERPRISES, INC., a Hawai'i corporation Plaintiff/Third-Party Plaintiff, v. MOOMUKU COUNTRY CLUB, a Hawai'i partnership, Chuck Maples and Les Hirahara, Defendants/Third-Party Plaintiffs-Appellants and James L. Watson, D.D.S., Defendant and Terry S. Hand, dba Hand Properties Mary Anne Bruno and Akie Yoshikawa, Third-Party Defendants, and Japan Grand Prix (Hawai'i), Ltd., Intervenor-Appellee.

No. 16751.

Supreme Court of Hawai'i.

Jan. 19, 1994.

Reconsideration Denied Feb. 3, 1994.

Syllabus by the Court

1. The Hawai'i Rules of Appellate Procedure (HRAP) do not require an appellant to designate who shall be an appellee in the notice of appeal. See HRAP 3(c). That designation is automatically determined pursuant to HRAP 3(d). Therefore, parties properly served with the appellant's notice of appeal are appellees on appeal.

2. This court has recognized an aggrieved party as one who is affected or prejudiced by the appealable order.

3. In cases where the disposition of the case is embodied in several orders, not one of which embraces the entire controversy but collectively does so, it is a necessary inference from Hawai'i Rules of Civil Procedure 54(b) that the orders collectively constitute a final judgment and entry of the last of the series of orders gives finality and appealability to all.

4. As a general rule, voluntary acceptance of the benefit of a judgment or order is a bar to the prosecution of an appeal therefrom. The rule does not apply, however, where the outcome of the appeal could have no effect on the appellant's right to the benefit accepted.

5. On appeal, an order of summary judgment is reviewed under the same standard applied by the trial courts. Summary judgment is proper where the moving party demonstrates there are no genuine issues of material fact and it is entitled to a judgment as a matter of law.

6. A covenant against encumbrances is an agreement to indemnify the covenantee in the event that he or she suffers any loss to the value of the premises due to the existence of an encumbrance.

7. The covenant against encumbrances is a present covenant, breached, if at all, at the time of the conveyance, and not thereafter.

8. The covenant against encumbrances is not breached unless the alleged encumbrance is, at the time of conveyance, actually in existence, valid, and enforceable.

9. An equitable lien is not judicially recognized until a judgment is rendered declaring its existence. Until such time, a claimed equitable lien is "a mere floating equity" that is unenforceable and does not encumber property.

10. An encumbrance is any burden resting either on the real estate itself, or on the title thereto, which tends to lessen the value, or interferes with its free enjoyment.

11. A lis pendens is an "encumbrance" as that term has been traditionally defined.

12. Whether a lis pendens should be expunged is a question to be resolved in the exercise of the trial court's discretion.

13. A lis pendens may only be filed in connection with an action (1) concerning real property, (2) affecting title to real property, or (3) affecting the right of possession of real property.

14. In determining the validity of a lis pendens, courts should generally restrict their review to the face of the complaint.

15. The likelihood of success on the merits is irrelevant to determining the validity of the lis pendens.

16. The interpretation of a statute is a question of law which this court reviews under the right/wrong standard.

17. The court's foremost obligation in construing a statute is to ascertain and give effect to the intention of the legislature which is obtained primarily from the language contained in the statute itself.

18. The statutory language must be read in the context of the entire statute and construed in a manner consistent with its purpose.

19. If the statutory language is ambiguous or doubt exists as to its meaning, courts may take legislative history into consideration in construing a statute.

20. Lis pendens statutes must be strictly construed and the application of lis pendens should be limited to actions directly seeking to obtain title to or possession of real property.

21. The true purpose of the lis pendens statute is to provide notice of pending litigation and not to make plaintiffs secured creditors of defendants nor to provide plaintiffs with additional leverage for negotiating purposes.

22. It has been long established under the doctrine of merger that, upon delivery and acceptance of the deed, the provisions of the underlying contract for conveyance are merged into the deed and thereby become extinguished and unenforceable, except for those promises which are additional or collateral to the main promise to convey the land and which are not inconsistent with the deed as given.

David Schulmeister (Cynthia M. Johiro, with him on the briefs, of Cades, Schutte, Fleming & Wright), Honolulu, for defendants/third-party plaintiffs-appellants.

Paul R. Mancini (Matthew V. Pietsch and Lea O. Hong, with him on the briefs, of Case & Lynch), Kahului, Maui, for intervenor-appellee.

Before MOON, C.J., and KLEIN, LEVINSON, NAKAYAMA and RAMIL, JJ.

MOON, Chief Justice.

Defendants/third-party plaintiffs-appellants Moomuku Country Club, Chuck Maples, and Les Hirahara (collectively, Moomuku) appeal from orders entered in the Second Circuit Court: (1) denying intervenor-appellee Japan Grand Prix (Hawai'i), Ltd.'s (JGP) motion to expunge a lis pendens; (2) granting JGP's motion for partial summary judgment; and (3) granting JGP's motion for attorneys' fees, costs, and judgment against Moomuku. Through these aforementioned motions, the circuit court ultimately held that Moomuku had breached its covenant against encumbrances contained in a limited warranty deed conveying real property to JGP because the property was encumbered by a lis pendens filed in conjunction with a complaint alleging an equitable lien on the property.

On appeal, we review questions of first impression: (1) whether a lis pendens constitutes an "encumbrance" within the scope of a covenant against encumbrances contained in a deed; and (2) whether a lis pendens may be based on a claim to an equitable lien against property. We hold that a valid lis pendens is an encumbrance on real property. However, we also hold that the filing of a lis pendens must be limited in application to actions directly seeking to obtain title to or possession of real property, and, by that standard, the lis pendens in this case was invalid. We further hold that a mere claim to an equitable lien on property is not an encumbrance, and therefore, we vacate the order of the circuit court granting JGP's motion for attorneys' fees, costs, and judgment against Moomuku.

I. BACKGROUND

On or about June 22, 1990, Moomuku entered into a land purchase agreement with Ulupalakua Ranch, Inc. for the purchase of 156 acres of real property located on the island of Maui (the property). ¹ On August 13, 1990, Moomuku and S. Utsunomiya Enterprises, Inc. (Utsunomiya) signed a "Letter of Intent To Purchase" (letter of intent) wherein Moomuku acknowledged that it was willing to sell, and Utsunomiya was willing to purchase, the property for $11,000,000.00. In an "Addendum" to the letter of intent, Utsunomiya agreed to pay a non-refundable deposit of $200,000.00 to Moomuku; however, a disagreement arose between Moomuku and Utsunomiya regarding the purpose of the non-refundable deposit, which dispute formed the genesis of this action.

Moomuku claimed that the letter of intent and the addendum together formed an option agreement under which Utsunomiya paid the non-refundable deposit in exchange for the option to proceed with purchase of the property after a fourteen-day due diligence period. During the fourteen-day period, Utsunomiya had the opportunity to investigate breaks in the record chain of title. Utsunomiya, on the other hand, claimed that the $200,000.00 was a deposit to be applied to the total purchase price and that the sale was conditioned upon Moomuku's ability to convey "free and clear title" by January 3, 1991.

Utsunomiya subsequently received a title report revealing numerous breaks in the property's chain of title. Concluding that Moomuku would not be able to convey free and clear title by the closing date, Utsunomiya notified Moomuku, by letter dated August 31, 1990, that it was rescinding the letter of intent and demanded return of its deposit. ² Having received no response, Utsunomiya again wrote Moomuku on September 18, 1990, demanding return of the deposit. Utsunomiya maintains that Moomuku never responded or attempted to assure it that clear title could be conveyed by the closing date.

On October 8, 1990, Utsunomiya filed a complaint in the Second Circuit Court seeking recovery of the $200,000.00 deposit as well as punitive damages, attorneys' fees, and costs. Among other allegations, Utsunomiya claimed that Moomuku misrepresented its ability to convey clear title. Utsunomiya simultaneously filed a "Notice of Lis Pendens" against the property alleging that the deposit was paid towards the purchase thereof. Moomuku, in turn, filed a third-party complaint against Utsunomiya's realtors, Terry Hand, dba Hand Properties, Mary Ann Bruno, and Akie Yoshikawa (collectively, third-party defendants), claiming that any harm Utsunomiya may have suffered was as a result of the third-party defendants' failure to accurately communicate the condition of title to Utsunomiya.

Based on Utsunomiya's declaration of rescission of the letter of intent, Moomuku began negotiations to sell the property to JGP. On October 25, 1990, JGP agreed to purchase the property ³ for $8,000,000.00, and the parties executed a "Land Purchase Agreement" wherein they agreed that JGP would place $6,750,000.00 in escrow by November 25, 1990, and pay the balance due ($1,250,000.00) at closing, which would be no later...