Waikiki Malia Hotel, Inc. v. Kinkai Properties Ltd. Partnership

• Decision Date: 19 November 1993
• Docket Number: No. 15184,15184
• Citation: 75 Haw. 370,862 P.2d 1048
• Parties: WAIKIKI MALIA HOTEL, INC., a Hawaii corporation, Plaintiff-Appellee/Cross-Appellant, v. KINKAI PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership, Defendant-Appellant/Cross-Appellee, and MNS, Ltd., a Hawaii corporation, Defendant-Appellee/Cross-Appellee.
• Court: Hawaii Supreme Court

Page 1048

862 P.2d 1048

75 Haw. 370

WAIKIKI MALIA HOTEL, INC., a Hawaii corporation Plaintiff-Appellee/Cross-Appellant, v. KINKAI PROPERTIES LIMITED PARTNERSHIP, a Delaware limited partnership, Defendant-Appellant/Cross-Appellee and MNS, Ltd., a Hawaii corporation Defendant-Appellee/Cross-Appellee.

No. 15184.

Supreme Court of Hawai'i.

Nov. 19, 1993.

Syllabus by the Court

1. The standard to be applied by the appellate court in reviewing a grant or denial of summary judgment is identical to that employed by the trial court. Summary judgment is proper when there is no genuine issue as to any material fact and the moving party demonstrates that it is entitled to judgment as a matter of law.

2. A covenant, as used in the context regarding the use of property, is an agreement by one person, the covenantor, to do or refrain from doing something enforceable by another person, the covenantee. Every covenant has a burden to the covenantor and a benefit to the covenantee.

3. Restrictive covenants restrain the free use of property and are strictly construed in favor of the grantee of the property and against the grantor. The general rule does not favor restrictions imposed upon the use of land, but rather the unrestricted use of property.

4. A party seeking to enforce a restrictive covenant in a deed has the burden to prove the parties' clear intention to create a covenant that would run with the land.

5. Real covenants, also known as covenants appurtenant, run with the land and are required to benefit a parcel of land known as the dominant estate.

6. A real covenant is one having for its object something annexed to, inherent in, or connected with, land or other real property--i.e., one which relates to, touches or concerns, the land granted or demised and the occupation or enjoyment thereof. A covenant is viewed as real in nature, or one that runs with the land, where either the liability to perform the duties therein enumerated or the right to take advantage thereof passes to the vendee or other assignee of the land.

7. In order to enforce a covenant appurtenant, a covenantee must continue to own the parcel of land benefitted by the covenant appurtenant.

8. For a real covenant to run with the land: (1) it must "touch and concern" the land; (2) the covenanting parties must intend it to run with the land; and (3) there must be privity of estate.

9. For a covenant to run with the land, it must extend to the land so that the condition required to be performed affects the quality or value of the land.

10. Whether restrictions imposed upon the land by a grantor impose a personal obligation or a servitude upon the land is determined from the parties' intentions at the time the deed containing the restriction was delivered.

11. When construing a restrictive covenant, the parties' intentions are normally determined from language of the deed. Substantial doubt or ambiguity is resolved against the person seeking its enforcement.

12. If the language of the deed is ambiguous, surrounding circumstances may be considered but not parol evidence. The use of surrounding circumstances, also known as extrinsic evidence, usually concerns the geographical location of the lands and the physical condition of the structures thereon.

13. In jurisdictions which refuse to raise any presumption in favor of the benefit being appurtenant to the retained land of the promisee, proof of the intention of the parties to the agreement becomes a necessary element of the complainant's case. Such an intention is clearly shown where the agreement itself expressly designates the land with which the benefit is to run to subsequent owners.

14. There are three types of privity of estate: (1) mutual, i.e., a covenant arising from simultaneous interests in the same land; (2) horizontal, i.e., a covenant created in connection with a conveyance of an estate from one of the parties to another; and (3) vertical, i.e., the devolution of an estate burdened or benefitted by a covenant from an original covenanting party to a successor.

15. A restrictive covenant in gross arises when the covenant does not benefit a specific parcel of land and the benefit is held personally by the grantor. Restrictive covenants in gross are not favored by the law. Accordingly, a covenant must clearly and expressly provide for the intent to create a covenant in gross.

16. The critical time for determining whether there was a sufficient understanding of the covenants on the part of the purchasers with regard to the meaning intended by the original grantors is the time of purchase.

17. Knowledge of an unregistered encumbrance does not disqualify the holder of a certificate of title from the protection afforded him by the title registration statute, Hawaii Revised Statutes (HRS) § 501-82.

18. The integrity of certificates of title must be scrupulously observed and every subsequent purchaser of registered land who takes a certificate of title for value, except in cases of fraud to which he or she is a party, is entitled under the provisions of HRS § 501-82 to hold the same free from all encumbrances except those noted on the certificate and the statutory encumbrances enumerated.

19. The fundamental intent of HRS § 501-82 is to preserve the integrity of titles.

20. In order to provide the holder of the transfer certificate of title full notice of the encumbrance from the face of the certificate, such encumbrance must be separately and clearly noted therein.

21. Generally, the requirements of standing to challenge an order or judgment are: (1) the person must first have been a party to the action; (2) the person seeking modification of the order or judgment must have had standing to oppose it in the trial court; and (3) such person must be aggrieved by the ruling.

22. An aggrieved party is one who has been affected or prejudiced by the appealable order.

23. Absent an express provision in a restrictive covenant to the contrary, the covenantor's obligation is ended at the transfer of property.

Robert J. Faris and Russell L. Ching of Gelber, Gelber, Ingersoll & Klevansky, on the briefs, Honolulu, for plaintiff-appellee/cross-appellant Waikiki Malia Hotel, Inc.

James A. Stubenberg, Frederick W. Rohlfing III, and Lorrie Lee Stone of Stubenberg & Durrett, and David L. Callies of the William S. Richardson School of Law, on the briefs, Honolulu, for defendant-appellant/cross-appellee Kinkai Properties Limited Partnership.

Vernon T. Tashima and Wayne H. Tashima, on the briefs, Honolulu, for defendant-appellee/cross-appellee MNS, Ltd.

Before MOON, C.J., LEVINSON, J., JAMES S. BURNS, Intermediate Court of Appeals Chief Judge, in place of KLEIN, J., recused, WALTER M. HEEN, Intermediate Court of Appeals Associate Judge, in place of LUM, C.J., recused, ^* and ACOBA, Circuit Judge, assigned by reason of vacancy. ^**

MOON, Chief Justice.

This consolidated appeal involves the interpretation and enforcement of a restrictive covenant of a deed. Defendant-appellant/cross-appellee Kinkai Properties Limited Partnership (Kinkai) appeals from the amended final judgment entered pursuant to the circuit court's grant of summary judgment in favor of plaintiff-appellee/cross-appellant Waikiki Malia Hotel, Inc. (WMH) wherein the court determined that the height restriction imposed by the covenant was binding upon Kinkai, a subsequent purchaser of the property in question but not a party to the deed in which the restrictive covenant is memorialized. The amended final judgment enjoined Kinkai from constructing any building, structure, or improvement in violation of the covenant and required that Kinkai remove and demolish any such building, structure, or improvement then existing on the subject property that was in violation of the covenant.

WMH has cross-appealed from a separate order granting summary judgment in favor of defendant-appellee/cross-appellee MNS, Ltd. (MNS). MNS, an original party to the deed in which the restrictive covenant is memorialized, purchased the subject property from JMK Associates (JMK), predecessor of WMH, and subsequently sold it to Kinkai. WMH's cross-appeal is limited to the extent that it seeks to hold MNS liable in the event this court determines that MNS's successor in interest, Kinkai, is not bound by the restrictive covenant.

We conclude that because: (1) the restrictive covenant (a) is appurtenant and runs with the land, and (b) was not noted on the 1988 Transfer Certificate of Title (TCT) issued to Kinkai, and (2) WMH owns no interest in any land benefitted by the covenant, WMH cannot enforce it against Kinkai or MNS. We therefore vacate the circuit court's final amended judgment entered in favor of WMH and remand with instructions that judgment be entered in favor of Kinkai. Additionally, we affirm the circuit court's order granting summary judgment to MNS.

I. BACKGROUND

In 1979, JMK acquired a 4,500 square foot lot in Waikiki bounded by Lewers Street, Kuhio Avenue, Royal Hawaiian Avenue, and Waikolu Way, identified on the tax map as Lot 48 (Lot 48). For purposes of this appeal, it is important to note that adjacent to Lot 48 is a parcel of land identified on the tax map as Lot 269, which was owned by Aina Luana Apartment-Hotel, Limited (Aina Luana), a wholly owned subsidiary of WMH. ¹ (See diagram below.)

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

All of the stock of JMK, WMH, and Aina Luana were owned by Joana Tom (also known as Joana Leong), Malcolm Tom, and Kenton Tom (collectively, the Toms).

On January 19, 1983, JMK sold Lot 48 to MNS because the Toms faced severe financial difficulties and needed to raise cash immediately. MNS intended to use the lot for a low rise parking structure and warehouse. Thus, in negotiating the sale price, JMK agreed to a lower offering price based upon MNS's agreement to the following height restriction, which was included in the deed (hereinafter, restrictive covenant or height...