DAVID EDWARD KIM, DENISE NYUK LEN KIM and TINA JEAN KIM Plaintiffs-Appellees
KEITH SHIGEAKI ODA, Defendant-Appellant/Cross, -Appellee, and DEPARTMENT OF TAXATION, STATE OF HAWAII, Defendant-Appellee/Cross-Appellant, and FINANCE FACTORS, LIMITED, DISCOVER BANK, through its servicing agent, DISCOVER FINANCIAL SERVICES, INC., UNITED STATES OF AMERICA, DEPARTMENT OF TREASURY, INTERNAL REVENUE SERVICE, DEPARTMENT OF LABOR & INDUSTRIAL RELATIONS, STATE OF HAWAII, Defendants-Appellees, and DOE PERSONS 1-20, AND DOE ENTITIES 1-20, Defendants.
NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS AND PACIFIC REPORTER
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CIVIL NO. 09-1-1242-05)
Edward C. Kemperfor Defendant-Appellant/Cross-Appellee
Hugh R. JonesMary Bahng YokotaDeputy Attorneys Generalfor Defendant-Appellee/Cross-Appellant DEPARTMENT OF TAXATION, STATE OF HAWAI'I
Frances E.H. Lum Deputy Attorney General for Defendant-Appellee DEPARTMENT OF LABOR AND INDUSTRIAL RELATIONS, STATE OF HAWAI'I
Neal K. Aoki (KOSHIBA AGENA & KUBOTA) for Plaintiffs-Appellees
Nakamura, Chief Judge, Fujise and Leonard, JJ.
Defendant-Appellant/Cross-Appellee Keith Shigeaki Oda (Oda) appeals from a July 30, 2010 Circuit Court of the First Circuit (Circuit Court) Judgment, which confirmed the partition sale of certain property, as prayed for by Plaintiffs-Appellees/Cross-Appellees David Edward Kim (David Kim), Denise Nyuk Len Kim (Denise Kim), and Tina Jean Kim (Tina Kim), Oda's ex-wife (collectively, the Kims). Defendant-Appellee/Cross-Appellant Department of Taxation of the State of Hawai'i (Tax Department) cross-appeals from the July 30, 2010 Judgment. Defendant-Appellee Department of Labor and Industrial Relations of the State of Hawai'i (DLIR) purports to "substantively join" in the Tax Department's Opening Brief, but did not submit a notice of cross-appeal.
I. BACKGROUND FACTS
A. The Property
The subject property in this partition action is a parcel of real property located in Aiea, Hawai'i (Property). On February 14, 1991, title to the Property was transferred to the Kims and Oda through a warranty deed. Oda and Tina Kim, who were married at the time of the transfer, held a fifty-percent interest in the Property as tenants by the entirety, and they were tenants in common in relation to the interests of David and Denise Kim. David and Denise Kim, who are married, held the other fifty-percent interest in the Property as tenants by the entirety as to each other.
Prior to June 2009, when the Kims filed the partition complaint herein, Oda and Tina Kim divorced and, as a result, each owned a twenty-five percent interest in the Property as tenants in common. David and Denise Kim continued to own a fifty-percent interest in the Property as tenants by the entirety and as tenants in common in relation to the interests of Oda and Tina Kim. In contemplation of Oda and Tina Kim's divorce, Oda and the Kims entered into an Agreement in Regard to Resolution of Tax Obligations and Possible Buyout of Interests in Real Property (Buyout Agreement), which is discussed further below.
B. The Liens
Defendant/Cross-Claimant/Counterclaimant-Appellee Finance Factors, Ltd. (Finance Factors) held an interest in the Property pursuant to a first mortgage of $100, 000, dated March II, 1991, and recorded in the Bureau of Conveyances of the State of Hawai'i (Bureau of Conveyances) as Document No. 91-033556. On March 11, 1991, the Kims and Oda executed and delivered to Finance Factors an Adjustable Rate Promissory Note and an Adjustable Rate Mortgage. In its Counterclaim and Cross-claim filed on June 29, 2009, Finance Factors alleged that, as of June 17, 2009, the Kims and Oda owed a principal balance of $69, 739.49, plus interest of $278.95, for a total of $70, 018.44, plus any further interest, late charges, and advances, accrued thereafter, as well as any attorneys' fees and expenses incurred by Finance Factors.
Finance Factors also held an interest in the Property pursuant to a second mortgage in the original amount of $130, 000, dated February 7, 1996, and recorded in the Bureau of Conveyances as Document No. 96-018016. On February 7, 1996, David and Denise Kim executed and delivered to Finance Factors an Adjustable Rate Promissory Note. In addition, on that same day, the Kims and Oda executed and delivered the second mortgage, with David and Denise Kim identified as the mortgagors, and with Oda and Tina Kim identified as accommodation mortgagors. In its Counterclaim and Cross-claim, Finance Factors alleged that, as of June 17, 2009, David and Denise Kim owed a principal balance of $102, 700.08 on the note associated with the second mortgage, plus interest of $308.10, minus an escrow of $1, 626.84, for a total of $101, 381.34, plus any further interest, late charges, and advances, accrued thereafter, as well as any attorneys' fees and expenses incurred by Finance Factors.
On August 12, 1994, the Tax Department recorded in the Bureau of Conveyances, as Document No. 94-134872, a Certificate of State Tax Lien against Oda in the amount of $66, 042.05, dated August 10, 1994. On December 12, 1995, the Tax Department recorded in the Bureau of Conveyances, as Document No. 95-160485, a second Certificate of State Tax Lien against Oda in the amount of $10, 540.70, dated December 11, 1995. The Tax Department identified its liens and claimed additional taxes, penalties, and interest were due from Oda, in its Answer and Affirmative Statement of Claim, filed on July 22, 2009, which included copies of the liens, and a summary of taxes due.
On September 20, 1994, the DLIR recorded in the Bureau of Conveyances, as Document No. 94-154533, a Certificate of State Tax Lien against Oda in the amount of $8, 483.21, which was dated September 15, 1994. On October 5, 1995, the DLIR recorded in the Bureau of Conveyances, as Document No. 95-128729, a second Certificate of State Tax Lien against Oda in the amount of $2, 533.99, which was dated October 4, 1995. On August 9, 1996, the DLIR recorded in the Bureau of Conveyances, as Document No. 96-115269, a third Certificate of State Tax Lien against Oda in the amount of $40.93, which was dated August 8, 1996. In its Answer and Affirmative Statement of Claim, filed on June 25, 2009, the DLIR referenced liens, taxes, penalties and interest due to DLIR, but did not include copies of its liens. Copies of its first and second Certificates of State Tax Lien were submitted to the Circuit Court by the DLIR, on November 10, 2009, in conjunction with its limited opposition to a summary judgment motion filed by Finance Factors. A copy of its third Certificate of State Tax Lien was submitted to the Circuit Court by the DLIR, on June 4, 2010, in conjunction with its limited opposition to the Kims' motion for confirmation of partition sale, which included a request for distribution of proceeds.
On September 4, 2008, Defendant-Appellee Discover Bank (Discover Bank) recorded in the Bureau of Conveyances, as Document No. 2008-139445, a judgment dated October 24, 2001, which was entered in favor of Discover Bank and against Oda in the amount of $6, 064.24.
On November 15, 2006, Defendant-Appellee Internal Revenue Service (IRS), recorded in the Bureau of Conveyances, as Document No. 2006-208753, a Notice of Federal Tax Lien against Oda, in the amount of $8, 195.70. In its Answer, Counterclaim, Cross-claim, filed on July 30, 2009, the IRS asserted an outstanding balance due on that lien in the amount of $574.40, as of August 3, 2009.
C. The Oda-Kim Divorce
Prior to the filing of Oda and Tina Kim's Divorce Decree on June 4, 2008, Oda and the Kims entered into the Buyout Agreement, which is undated, but appears to have been executed some time in 2005. In the Buyout Agreement, Oda agreed to make a good faith effort to negotiate a release of the tax liens on the Property. Upon a settlement with the taxing authorities, Denise and David Kim were to be given an opportunity to buy the Property from Oda and Tina Kim. Paragraph 12 of the Buyout Agreement set forth the parties' agreement, if one of the parties was unable to timely perform their obligations, and provides as follows:
If, notwithstanding the best good faith efforts of the parties, one or more of them are unable to perform their obligations hereunder within the specified time periods, and it is therefore not possible to effect a buyout in regard to the [Property] in accordance with the terms and provisions set forth herein, then, the parties' rights, obligations, and interests with respect to the [Property] in the Divorce shall be settled and resolved as follows:
(a) [Tina Kim], [Oda], and [David and Denise Kim] shall continue to be co-owners of the [Property], subject to the Mortgages and the Tax Liens.
(b) [Tina Kim] shall own a one-fourth (1/4) share of the [Property] as a tenant in common as to the other co-owners.
(c) [Oda] shall own a one-fourth (1/4) share of the [Property] as a tenant in common as to the other co-owners.
(d) [David and Denise Kim] shall own a one-half (1/2) share of the [Property] as tenants in common to [Tina Kim] and [Oda], and as tenants by the entireties as to each other.
Oda and Tina Kim's Divorce Decree divided and distributed their respective interests in the Property in accordance with the Buyout Agreement, except that it extended the date by which Oda needed to complete his negotiations with the tax authorities. The Divorce Decree also provided that the parties' mortgage loans with Finance Factors, and tax liabilities related to Oda's dissolved business would be governed by the terms of the Buyout Agreement, and that all other debts would be the sole responsibility of the party who incurred that debt, unless it was addressed in the Buyout Agreement. The Divorce Decree further provided, however:
2) If Oda does not successfully negotiate agreements with the tax authorities which satisfy the Tax Obligations and result in the release of the Tax Liens, in accordance with paragraphs 1-11 of the [Buyout Agreement], then, if and to the extent that he makes or is required to make payments to the tax authorities on account of the Tax Obligations after the effective date of this Decree, [Tina Kim] shall indemnify [Oda] and shall reimburse him in an amount, or in such amounts, that total one-half (1/2) of any payments made by [Oda] on account of the Tax Obligations.
D. Circuit Court Proceedings
On June 1, 2009, the Kims filed a complaint seeking a partition sale of the Property pursuant to Hawaii Revised Statutes (HRS) §§ 668-7 (1993) and 668-13 (1993), including the equitable apportionment of the sales proceeds, and an award of attorneys' fees and costs. The other parties to the partition answered, and filed various affirmative statements of interest, counterclaims, and cross-claims.
At a November 18, 2009 hearing on the Kims' motion for summary judgment and interlocutory decree of partition by sale, Finance Factors' limited cross-motion for summary judgment, and Oda's motion for summary judgment, the Circuit Court: (1) granted the Kims' motion, (2) denied Oda's motion, and (3) granted Finance Factors' cross-motion. The Circuit Court concluded that it had jurisdiction to hear the partition case and that the Kims had not waived their right to partition in the Buyout Agreement.
On December 11, 2009, the Circuit Court entered its Findings of Fact, Conclusions of Law, Order Granting Defendant Finance Factor, Limited's Cross Motion for Summary Judgment. Also on December 11, 2009, a separate Judgment was entered on the order in favor of Finance Factors, pursuant to Hawai'i Rules of Civil Procedure (HRCP) Rule 54 (b) . No appeal was taken from the December 11, 200 9 Judgment.
On December 22, 2009, the Circuit Court entered its Order Granting Plaintiffs' Motion for Summary Judgment and Interlocutory Decree of Partition By Sale, as well as a separate order denying Oda's motion for summary judgment.
On February 25, 2010, a Commissioner's Report was filed, seeking, inter alia, confirmation of the sale of the Property to ...