State Sav. & Loan Ass'n v. Corey
| Decision Date | 09 September 1971 |
| Docket Number | No. 5021,5021 |
| Citation | 488 P.2d 703,53 Haw. 132 |
| Court | Hawaii Supreme Court |
| Parties | , 53 Haw. 176, 53 Haw. 177 STATE SAVINGS & LOAN ASSOCIATION, Plaintiff-Appellant on Count I, Appellee and Cross-Appellant on Count II, v. Ralph E. COREY and Robert M. Kimbrough, Defendants-Appellees on Count I, Appellants and Cross-Appellees on Count II, and Wallace C. S. Young, Defendant-Appellee on Count I, Appellant on the Cross Claim in Count I. Ralph E. COREY and Robert M. Kimbrough, Third-Party Plaintiffs, v. BETTER BUILT HAWAII, LTD., Third-Party Defendant. |
Syllabus by the Court
1. The doctrine of res judicata precludes the relitigation, not only of the issues which were actually litigated in the first action, but also of all grounds of claim and defense which might have been properly litigated in the first action but were not litigated or decided.
2. Collateral estoppel is an aspect of res judicata which precludes the relitigation of a fact or issue which was previously determined in a prior suit on a different claim between the same parties or their privies.
3. A jury finding on a factual issue supported by substantial evidence may not be set aside by the court.
4. On a motion for a directed verdict, the evidence and the inferences which may be fairly drawn therefrom must be considered in the light most favorable to the party against whom the motion is directed, and if the evidence and the inferences so viewed are of such character that reasonable persons in the exercise of fair and impartial judgment may reach different conclusions upon the crucial issue, then the motion should be denied and the issue submitted to the jury.
James S. Campbell, Honolulu (Peter Chiping Char, Honolulu, with him on the briefs; Cades, Schutte, Fleming & Wright Honolulu, of counsel), for plaintiff-appellee, cross-appellant State Savings & Loan Assn.
Helen B. Ryan, Honolulu (Ryan & Ryan, Honolulu, of counsel), for defendants-appellants, cross-appellees Robert M. Kimbrough and Ralph E. Corey.
Asa M. Akinaka, Honolulu (Padgett, Greeley, Marumoto & Akinaka, Honolulu, of counsel), for defendant-appellant, cross-appellee Wallace C. S. Young.
Before RICHARDSON, C. J., ABE and KOBAYASHI, JJ., and HAWKINS, Circuit Judge, in place of MARUMOTO, J., disqualified, and M. DOI, Circuit Judge, in place of LEVINSON, J., disqualified.
This appeal is the result of a suit initiated by State Savings & Loan Association (hereinafter State Savings or plaintiff) against Robert M. Kimbrough (hereinafter Kimbrough), Ralph E. Corey (hereinafter Corey) and Wallace C. S. Young (hereinafter Young) (hereinafter collectively called defendants) for a mortgage loan made by State Savings in favor of Kauaian Development Company, Inc. (hereinafter Kauaian Development).
In Count I of the complaint, State Savings alleged that though Kimbrough, Corey and Young were personally obligated through a written undertaking to discharge certain mechanic's liens of Kauai Commercial Company, Limited (hereinafter Kauai Commercial), they failed to discharge said liens. In Court II, State Savings alleged fraud, encompassing representations made to State Savings by Kimbrough, Corey and Young in their procurement of a mortgage loan from State Savings for Kauaian Development.
Young instituted a cross-claim against Kimbrough and Corey, claiming that if any judgment is obtained against Young then Kimbrough and Corey be held liable for the full amount of the judgment.
The following jury verdicts are pertinent in this appeal:
1. On Count I, in favor of State Savings and against Kimbrough, Corey and Young;
2. In regard to Young's cross-claim in Count I, in favor of Kimbrough and Corey and against Young;
3. On Count II, in favor of State Savings and against Kimbrough and Corey, but not against Young.
Judgment was accordingly entered.
Subsequently the judgment above was set aside and the following judgment was entered which:
1. As to Count I, entered a judgment notwithstanding the verdict in favor of Kimbrough, Corey and Young;
2. As to Count II, affirmed the judgment of liability for fraud against Kimbrough and Corey but ordered a new trial solely on the issue of damages for fraud.
This appeal comes from the foregoing, as follows:
1. By State Savings from the final judgment notwithstanding the verdict on Count I and by State Savings in the form of an interlocutory appeal with regard to the granting of a new trial on the issue of damages under Count II;
2. By Kimbrough and Corey from the judgment affirming the fraud in Count II;
3. By Young from the judgment in favor of Kimbrough and Corey and against Young in his cross-claim in Count I.
Kimbrough, Corey and Young were the principal officers and stockholders of Kauaian Development. Kimbrough and Corey were president and vice president-general counsel, respectively. At the inception of the dealings between the parties to this case, Kimbrough and Corey met with a representative of State Savings to work out the figures for the proposed loan. After many negotiations State Savings agreed to a mortgage loan of 65% of the appraised value of the land and construction costs.
Pursuant to this arrangement Corey submitted to State Savings a financial statement of a proposed hotel condominium which included a specific cost for construction in the amount of $761,500.00. This statement was signed by Corey as vice president of Kauaian Development. Kauaian Development already had a contract in existence with the contractor, Better Built Hawaii, Ltd. (hereinafter Better Built), for construction of the hotel condominium at a cost price of $600,000.00, less than that represented to State Savings. This previously made contract between Kauaian Development and Better Built was evidenced by a letter agreement signed by the president of Better Built and Kimbrough for Kauaian Development. The essence of this agreement provided that the higher construction cost figure given to State Savings was to be considered as between Better Built and Kauaian Development 'for financing purposes only', and was not to modify their existing agreement at the lower cost figure.
Subsequently State Savings was furnished, at its request, a copy of what was purported to be the contract between Better Built and Kauaian Devlopment. I was signed by the president of Better Built and by Kimbrough as president of Kauaian Development. It included the same higher construction cost figure previously submitted by Corey to State Savings.
The closing documents for the mortgage loan in the amount of $857,000.00, based in part upon the higher construction figure represented to State Savings, were signed and formally executed. During the process of preparing for the closing it became apparent that the total amount of the loan as proposed would not cover the total expected cost to finish the construction, which had already started. In order to assure that this deficiency would be met and that there would be sufficient funds to complete the construction, State Savings accepted Kimbrough's, Corey's and Young's personal guarantee that any such funds would be paid by them. In part this agreement reads as follows:
This statement shows an additional amount to be received from the development company to provide for all loan disbursements in the amount of $46,485.50. Although the loan is made to the corporation, of which the undersigned are officers, it is hereby agreed that the undersigned officers pledge their personal liability for the above amount of money, or any other amount of money that may be necessary, to complete the proposed Hyatt House development on the island of Kauai. We guaranty that this money will be available for the payment of expenses to complete this project as originally proposed in the mortgaging agreements.
This agreement was signed by Kimbrough, Corey and Young.
Under the mortgage loan arrangement, construction progress payments were to be paid to Kauaian Development rather than Better Built as requested by defendants. Eventually all the progress payments under the loan were made, the construction was completed and the hotel condominium started its operation.
Repayment of the mortgage loan became delinquent and State Savings instituted, in the fifth circuit court in Civil No. 636, a mortgage foreclosure proceeding against Kauaian Development and the individual unit owners. The court in said case ordered that the property be foreclosed and sold to pay the balance due on the mortgage and two mechanic's liens which were adjudged to have priority over the mortgage. The mechanic's liens totalled $28,506.70. The court ordered the property sold at public auction at an upset price of $1,051,200.80. This amount included the balance due on the mortgage, the mechanic's liens and the foreclosure expenses. There were no bidders at the upset price sale.
The court determined that the property should be sold with no upset price. At the second sale State Savings itself purchased the property for $913,000.00. This left a difference of $138,200.80 between the purchase price and the upset price.
The jury in the instant case, which is now on appeal, rendered a verdict of $28,506.70, the amount of the mechanic's liens, on Count I under written guarantee agreement against defendants Kimbrough, Corey and Young. Under Count II for fraud, a verdict of $109,694.10 was rendered against defendants Kimbrough and Corey. These two figures total the $138,200.80 difference between the upset price and the purchase price.
The questions before us that we consider necessary to answer are: (1) Whether the defense of res judicata is applicable to the present case; (2) Did the trial court err in setting aside the judgment on Count I and granting a judgment notwithstanding the verdict? (3) Did the trial court err when it failed to grant a judgment notwithstanding the verdict on Count II? (...
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