Case Title: KNG Corporation v. Kim. S.Ct. Order Denying Motion for Reconsideration, filed 05/06/2005 [pdf], 107 Haw. 348.

Citation: 107 Haw. 73

Docket Number: 

State: hawaii

Court: Hawaii Supreme Court

Date: 2005-04-01T00:00:00Z

Document:
‘*##POR PUBLICATION®#* UAW uBRARY

aad

 

KG CORPORATION, Plaintiff-appeliee | :

CAROL KIM and POLO TRADING, INC., Defendants-Appellants.

No. 25038

APPEAL FROM THE DISTRICT COURT OF THE FIRST CIRCUIT
(CIV. NO. 1RC 02-1052)
APRIL 1, 2005
MOON, C.d., LEVINSON, NAKAYAMA, ACOBA, JJ.,

AND INTERMEDIATE COURT OF APPEALS CHIEF JUDGE BURNS,
ASSIGNED BY REASON OF VACANCY

OPINION OF THE COURT BY ACOBA, J.

We hold that, before ordering that @ rent trust fund
Pursuant to Hawai'i Revised Statutes (HRS) § 666-21 (1993) be
established, the district court of the first circuit (the court)
should have held a hearing on the claim of Defendant-Appellant
Carol Kim (Defendant), as tenant of outdoor spaces rented to her
by Plaintiff-appellee KNG Corporation (Plaintiff), that she was
not allowed to take possession of the said spaces. Because we
remand the case, we conclude, for guidance of the court, that HRS
§ 666-21 does not violate the due process and equal protection

clauses of the state and feder:

 

utions.
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I

a
On October 12, 2001, Defendant, as President of

Defendant~Appellant Polo Trading, Inc., entered into a conmercial

License agreement with KNG to purchase two vending carts! and

sublease eight twenty-five-square-foot spaces for an outdoor

 

vending cart operation.’ The scheduled lease term affecting two

of the carts was from November 15, 2001 to November 14, 2004; the
scheduled lease term affecting the other six carts was from
December 15, 2001 to November 30, 2004.7

Defendant allegedly paid to Plaintiff $48,000 as a
premium for the outdoor spaces (the property), $21,000 to
purchase the two existing carts, a security deposit of

$20,833.20, and the initial month's rent of $18,229. A dispute

The remaining six carts were to be built by Defendant.

2 in other conditions of the agreenent the parties assented to
License fee of eight percent per cart of monthly grose sales, with =
contractually stipulated sinimim of $1,950 per month per cart a total of
§15,600/no.}, plus Hawai'l general excise tax. The security deposit
Fequirenent in the contract wae $20,933.20 per month, plus Hawai general
excise tax. Defendant also agreed to pay $550 per month per cart (a total of
54400/n0.) for operating expenses, plus avai" general excise tax for 2001.

Defendant agreed to purchase a coffee cart and crepe cart for
$18,000 and $6,000, respectively. Defendant also agreed to pay $550 per month
Per cart’ (a total Sf §4400/no.) for operating expenses, plur dawait general
excise tex for 2001. “Raditionally, paragraph M of the lease agreement states,
“tenant sarees to pay to Landlord as premium $6,000 per cart for eight carte
fora total of $48,000.00, upon execution of License Agreement. Upon,
execution of Licente Ajreenent, this premiom shall be non-refundable,
Fegardlecs of Tenant occupancy cr performance.”

 

 

   

 

 

 

 

2 the actual lease states that the lease expiration date for Carts 1
through 6 ie Novenber 36, 2001, bet since this termination date presente 2
logical confiice with thé ccancncenent date, it is presumed that Plaintifé’e
fended Answering rief, listing the lease expiration date ae Novenber 30,
2004, 0 corrects

      

 
‘***POR PUBLICATION***

arose as to the location of six of the carts and Defendant clains
she was never given occupancy of the property.
B
on February 12, 2002, Plaintiff filed a complaint
requesting $44,270.45 in unpaid rent and general excise taxes, a

judgment giving Plaintiff possession of the property, and a writ

 

of possession directing the sheriff or police officer ti
(2) remove Defendant (s) from the property and all persons
possessing the property through Defendant(s)? (2) remove from the
property all personal belongings of Defendant(s) and of any other
person; and (3) put Plaintiff in possession of the property.

On the return date of the sunnons, February 25, 2002,
Defendant entered a general denial to the complaint, the
Honorable Judge David F. Fong presiding. At the hearing,
Plaintiff orally moved for the establishment of a rent trust fund
pursuant to HRS § 666-21 (1993). Defendant responded that the
request should be done by written motion and that possession of
the property had never been provided to Defendant, but the court
granted the motion:

[Defense counsel]: Your Honor, we would oppose this,
This should be Sone by motion and we haven't ==

 

 

‘The Court: We have the authority ~
[Defense counsel]: --actually=~
The Court: We have the authority to order that. And
Sf 2 there should be no prejudice es long as the rent ts

Betense counsel]: Well, there's an argument the rent
hee been peid. So there's an’ argument over ==
(Defense counsel): No.” The rent was paid in advance,

 

 
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‘The Court: Well, I'm going to order the rent trust
fund granted:
(Emphasis added.)

The court ordered Defendant to deposit $20,833.29 into
the rent trust fund by 4:00 p.m. on March 1, 2002 and by the
first of each month thereafter until the dispute was concluded.
The parties were to convene again on March 4, 2002 for a pre~
trial hearing.

At the pre-trial hearing on March 4, 2002, Plaintift’s

 

counsel stated that Defendant had failed to submit the monies
into the rent trust fund and requested that the judgment for and
writ of possession be issued effective that day. Defense counsel
confirmed that payment had not been made and asserted that the
establishment of the rent trust fund without @ hearing was
unconstitutional. ‘The defense also indicated that an appeal with

respect to the order of-a rent trust fund would be filed, along

 

with a demand for a jury trial with respect to damages.‘ The

court apparently granted Plaintiff's request for writ of

Possession. On March 5, 2002, pursuant to HRS § 666-11 (1993),*

< the demand for trial by jury with respect to damages was
transferred to the circuit court the day before the Judgment for possession
and writ of poesession were entered

 

* was © 666-12 states as folloxs:

udgeent; writ of possession. If it is proved to the

istaction of the court that the plaintifé is entitled to

the potsession of the premises, the plaintiff shall have

judgment for possession, and f2r the plaintiff's coste.

Execution shall issue sccordingly, The writ ot possession

shail issue to the sheriff or to 4 police officer of the

Circuit where the proicce are situated, conansing the

sheriff or police officer to rencve ali persons. {rom the

Premises, ond to pot plaintiff, or the plaintiff's agent,
Toontanved.)

  

 

 

 

 

 
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the court entered a judgment for possession and a writ of
possession in Plaintige’s favor.

Defendant appealed on April 4, 2002 from 1) the
Judgment for possession, and 2) the writ of possession.

n.
a.

Defendant claims that HRS § 666-21 violates the due
process clause of section I of the Fourteenth Amendment to the
United States Constitution’ and/or article I, section 5 of the
Hawai'i State Constitution’ in that it requires, as a
precondition for trial, the payment of rent into a trust fund
without (1) proof of any rent default, (2) prior notice and
hearing, and (3) the posting of a bond by Plaintiff. Defendant
further argues that the court failed to ascertain whether rent

was actually owed and that HRS § 661-21 viclates equal protection

 

Ss sseonténuea)

inte the full possession thereof.
+ Section 1 of the Fourteenth Amendment to the United states
Constitution seat

 

ALL persons born or naturalized in the United States,
and subject to the jurisdiction chereof, are citisens of the
Onited stares and of the State wherein they reside, No Store
shall make or enforce any law which shall abridge the
privileges or iInmunitien of citizens of the United State:
hor shall any State deprive any person of Life, Liberty, or
Property, without due process of law) nor deny’ to any person
within its jurisdiction ene equal protection of the Lane.

 

      

 

 

* Article 1, section § of the Hawal's State Constitution (Dve

Process and Equal Protection) states:

 

 

No person shall be deprived of Life, Liberty or
property without due process of lax, nor be denied the equal
Protection of the laws, nor be denied the enjoyment of the
perscn's civil righte or be discriminated against. in the
exercise therect because of race, religion, sex or ancestry.

 

 

 
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because it discriminates between renters who can afford rent
trust fund deposits and those who cannot.
BL
Initially, Plaintiff argues that Defendant's challenge
to the court’s grant of summary possession is moot because
(1) Defendant asserted she was never in possession of the
premises, (2) Defendant did not file a motion to stay the writ of
possession or a motion for reconsideration, and (3) the writ of
possession has been issued and executed. Plaintiff also contends
that the court's action was constitutional because the rational
basis test applies to HRS § 666-21 and the rational basis test is
satisfied.
©.
‘The Attorney General for the State of Hawai'i submitted
an amicus curiae brief. The position of the State is that (1)
the Hawai'i appellate courts lack jurisdiction because of
untimeliness of the appeal; (2) in this case, the exception
announced in Forgav v. Conrad, 47 U.S. 201 (1848) [hereinafter
Foray doctrine], permits an order for payment into a rent trust
fund; (3) the case is moot because execution of the writ of
possession has ousted Defendant; and (4) HRS § 666-21 is
constitutionally valid.
nH.
A
As mentioned, the State first maintains that
Defendant's appeal is untimely because the April 4, 2002 notice

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of appeal was not filed within thirty days of the “February 25,
2002 [rent trust fund) order.” However, there is no February 25,
2002 rent trust fund order--there is merely the February 25, 2002
oral decision by the district judge. The oral decision is not an
appealable order. gee HRAP 4(a)(1) (*[T]he notice of appeal
shall be filed within 30 days after entzy of the judgment or
appealable order.”); HRAP 4(a) (5) ("A judgment or order ie
entered when it is filed in the office of the clerk of the

court.").

 

In civil cases before the district court, “{t)he
filing of the judgment in the office of the clerk constitutes the
entry of the judgment; and the judgment is not effective before
such entry.” District Court Rules of Civil Procedure Rule 58.
See Hawai'i Rules of Civil Procedure Rule 58. As such, the
February 25, 2002 oral decision regarding the rent trust fund is
an interlocutory decision in the sunmary possession case that is
reviewable on appeal from the judgment for possession. See
Eionser Mill Co. v. Ward, 34 Haw. 686, 694 (1936) (stating that
an appeal from a final judgment “brings up for review all
interlocutory orders not appealable directly ae of right which
deal with issues in the case” (citations omitted) ).
8

‘The State further contends that the Forgay doctrine
does not provide a jurisdictional basis for this appeal because
Defendant is appealing the February 25, 2002 rent trust fund

decision and the Foray doctrine does not apply to transfers of

 

monies into a court fund. “The Foraay doctrine is an exception
*#*F0R PUBLICATION*#*

 

to the finality requirement for appeals and it allows an
appellant to immediately appeal a judgment for execution upon
property, even if all claims of the parties have not been finally
resolved.” Ciesla v, Reddish, 78 Hawai'i 18, 20, 889 P.2d 702,
704 (1995). “Under the Forgay-Conrad rule, the lover court's
order is treated as final for appeal purposes where the losing
party would be subject to irreparable injury if appellate review
had to avait the final outcone of the Litigation.” Bank of
Hawaii v. Davis Radio Sales & Serv. Inc. 6 Haw. App. 469, 475
n.10, 727 P.2d 419, 424 n.10 (1986).

‘The State asserts that the Eoraay doctrine should not
be applied to the termination of @ leasehold interest in
commercial property because Defendant has an adequate remedy in
noney damages and, hence, there is no irreparable injury.
However, the seminal Hawai'i case on the Zorgay doctrine, Benn v.
‘Transp. Lease Hawaii, Ltd., 2 Haw. App. 272, 630 P.24 646 (1981),
involved termination of a leasehold interest in automobiles that

vas held to be appealable under Foray.

 

Plaintiff and the State finally contend that this
appeal is moot because the writ of possession was executed and

Defendant is not in possession of the subject premises. However,
the agreement gave Defendant possession until Novenber 14, 2004,

with “one 3-year option to renew.” See Exit Co. Lid. Prship vw

» 7 Haw. App. 363, 366, 766 P.2¢ 123,
131 (1988) (determining in a summary possession case that an

8
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appeal from a judgment for possession is moot where the appellant
legally cannot regain possession of the subject premises, i.e,
the lease is “not subject to renewal or extension,” should the
judgment for possession be vacated by the appellate court).
Hence, because there was an option to renew, this court has
jurisdiction to review the case."
Ww.

The purpose of a sunmary possession action is to place
the landlord in possession of the subject premises. Pursuant to
the summary possession statue,

Iwinenever any lessee or tenant of any lands or tenenents

STholde possession. without Fight, after the
termination of the tenancy, either by passage of tine or by
reason of any forfeiture, under the conditions or covenants
inva lease, . .. the person entitled to the premises nay be
restored to tho possession thereof [pursuant to the summary
preceeding provided in HRS chapter 666].

 

 

 

HRS § 666-1 (1993) (emphasis added). Accordingly, the
“proceeding provided under HRS chapter 666 is not for the trial
of title to land, but its primary purpose is the determination of
the right to possession between the person claiming to be the
landlord and one claiming to be his (or her) tenant.” Lum vw
Sun, 70 Haw. 288, 292-93, 769 P.2d 1091, 1094 (1989) (citing 3A
G. Thompson, Conmentaries on the Modern Law of Real Property
$1370, at 722 (J. Grimes Repl. 1981) (footnote and brackets
omitted). “(T]he statutory proceeding described in HRS chapter

666 is meant to provide ‘a remedy that enables the landlord to

 

  

as to moctness, ee gupta page 6, also
inilar reason, nt had possession of two spaces and s¢h
prarrrare "© failure to apply for a stay of the writ or for
Feconsideration would not most the question of posteesio:

© plaintstere

   

     

 

8
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obtain possession of leased premises without suffering the delay,
loss and expense to which . . . [the landlord] might be subjected
if he [or she] could only rely on the common law to remove a
tenant who is wrongfully holding over his {or her] term.” Id.
(brackets omitted); see also Kamaole Two Hui v, Aziz Enters...
Inc, 9 Haw. App. 566, 572-73, 854 P.2d 232, 236 (1993). “At
common law, one with the right to possession could bring an
action for ejectment, a ‘relatively slow, fairly complex, and
substantially expensive procedure.” Lum, 70 Haw. at 294 n.5,
769 P.2d at 1095 n.5 (quoting Lindsey v. Normet, 405 U.S. 56, 72
(1972) (other citation omitted). ‘Thus, summary possession was an
accelerated and economical means by which to regain possession.
v.

The rent trust fund is intended to maintain the status
quo, continuing possession in the tenant so long as the tenant
Pays the agreed rent as it comes due. The rent trust fund

provision, HRS § 666-21 states, in part:

  

provided under subsection proviaes
‘hat the canant shall oot be ceauised 2 dacoait any rent
Ehtient tas aisaay been caus to the landings
Sendeit of tant into the Tond ordered onder thie
hall sftect the tenant's ciahts to assert either that
iu fader thie chapter

(DL if the tenant is unable to comply with the court's
order under subsection (a) in paying the required ancunt of
Fent to the court, the landiord shall nave dudgnent for
Possession and execution shall ‘enue accordingly. +

(c) . 1 « The court shall order peyment of the money
collected cr portion thereof to the landlord if the court

 

  

 

 

 

 

 

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(Emphases added.) A review of the legislative history indicates
that HRS § 666-21 was modeled on HRS § 521-78, the rent trust
fund statute pertaining to the residential landlord-tenant code.’
See Hise. Stand. Comm. Rep. No. 324, in 1984 House Journal, at
978. HRS § 521-78 was enacted because “[tJhe legislature (found)
that the landlord often obtains possession after a long, drawn
out court proceeding, only to find that the tenant cannot or will
not pay for the time in which the tenant was in possession of the
premises.” 1978 Haw. Sess. L. Act 75, § 1, at 98. The

legislature’s concern was that

 

Af a diepute regarding the payment or nonpayment of rent
arises and the tenant refuses co pay all fents, a landlord
has no recourse but to commence lengthy evicticn
Proceedings. liowever, eviction proceedings will not
Eompensate che landlord for the rent accrued since,
Fractical natter, at the end of the proceedings the landlord
Would gain possession only.

 

 

     

 

 

Rs § 521-78 (2993) states, in relevant part, as follows:

 

(a) At the request of either the tenant or the
landlord in sny'court proceeding in which the peysent oF
fonpayment of rent is in dispute, the court shall order the
tenant to deposit any disputed rent sr it becomes due into
the court as provided ender subsection (c), + provided
that the tenant shall not be required to deposit any ene
where the tenant can show to the court's satisfaction that
the rent has already been paid to the landlord «se. Ne
deposit of rent into the fund ordered under nie section
shail affect the tenant's rights to assert either that
payment of ront was made of that any grounds for nonpayment
Sf vent exist under this chapter

b) If the tenant = onab:

 

 

 

 

to comply with the court's
order under subsection (a) in paying the required amount of
Fent inte the court, the landlord shail have judgnent: for
possession and execution shall issue accordingly

 

 

(Enphacis added.)
 

FOR PUBLICATION*#*

 

Sen. Stand. Com. Rep. No. 557-78 in 1978 Senate Journal at 998.
Thus, the intended rent trust fund procedure was to “expedite the
resolution of [rent] disputes” and to provide an alternative to
eviction proceedings. See Sen. Stand. Com. Rep. No. 595-84, in
1984 Senate Journal at 1304 (contemplating the purpose of HRS

$ 521-78).

As pointed out, the rent trust fund, HRS § 66-21,
provides that, at the request of tenant or landlord, a court
“shall order the tenant to deposit any disputed rent as it
becomes due into the court.” HRS § 666-21(a). “If the tenant is
unable to comply . . . in paying the required amount of rent to
the court, the landlord shall have judgment for possession.” HRS
§ 666-21(b)."* Significantly, the legislature indicated that the
rent trust fund was necessary to prevent the situation in which
the “tenant cannot or will not pay for the time in which the
tenant was in possession of the premises.
Act 75 § 1, at 98 (emphasis added). Correlatively, if a tenant

 

1978 Haw. Sess. L.

 

the tenant is afforded several protections from wrongful
Glepossession. First, “where the tenant can show ta the court’s satisfaction
that the rent has already been paia to the Jandiors[,]" the court shail not
Sex payment of rent. into the fund. HRS § €66-21(e). Second, deposit of
{Eis Only peraitted a Lt becones doe under the lease terme. See id, In
other words, the tenant's rental cbligation is no greater than as negotiated
in the lease, Third, the deposit of rent into the fund dose not affect the
fenant’s right to assert defenses. The court has the discretion ins summary
Possession case to sever the issue of a determination of the landlord's right
suenary possession from other issues. ga lily 70 Haw. at 291, 769 P.2a at
2095-96; gee also Kamacle Duo tui, 9 Haw. App. at S74 n.9, 654 F.2d at 236
8.9; Hse.” Stand. Con. Rep. No. €03, in i978 louse Journal, at 1660 (stating
“[nje deposit of rent into the’ fund... shall affect the tenant's
ghts to assert either that paynent of rent was sade or that any grounds for
honpayment of rent exist” and indicating that payment nto the rent trust
fund “are not an adsission of nenpaynent or wrongful withholding, But an
expression of geod faith on the part of the tenant”). Lastly, sanctions are
Provided if the court finds that" ene requesting party raised the issue of
Peyment or noneaynent of rent in bad faith, see HRS $ 666-2104)

 

   

 

 

    

    

 

 

     

 

12
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has not been given possession of the property, it would appear

improper for the court to order the establishment of a rent trust
fund. In accordance with the rationale underlying HRS $5 666-1
and 666-21, landlords who do not provide possession to the tenant
do not require an eviction proceeding or the protection of a rent
trust fund.

Defense counsel protested the rent trust fund order on

the basis that his

 

ent had “actually never taken possession.”
If Defendant was not provided with possession of the property or
any part thereof, the court was obligated to hear counsel before
ordering Defendant to pay into a rent trust fund." Therefore,
we vacate the court's March 5, 2002 judgment for possession and
weit of possession and remand the case for a hearing as to
whether possession had been given Defendant so as to justify the
imposition of such a fund.
vr.

To provide guidance to the court on remand, see e.0.,
Gap v. Puna Gecthernal Venture, 106 Hawai'i 325, 241-43, 104 P.3¢
912, 928-30 (2004) (offering guidance to circuit court on remand

as to setting appropriate sanction); Nelson v. Univ. of Hawai'i,
97 Hawai'i 376, 386

 

6, 38 P.3d 95, 104 n.6 (2001) (addressing

evidentiary issues to provide guidance to the court on remand);

Torres v, Northwest Ena’a Co,, 86 Hawai'i 383, 399, 949 P.2d
1004, 1020 (App. 1997) (discussing the plaintiff’s motion for

MRS § 666-21 (2) authorizes the court *:

“rent as it becones due” into the trust tu

 

erder the tenant to
ep.

   

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partial JNOV upon vacatur of a JNOY order in favor of the
defendant “for the edification of the circuit court on remand”),
we address Defendant’s argument that HRS § 666-21 ie “both on its
face and as applied in this case, contrary to bedrock and
elementary minimum requirements of both due process of law and
the equal protection of the laws.”

a.

“The basic elements of procedural due process of law
require notice and an opportunity to be heard at a meaningful
time and in a meaningful manner before governnental deprivation
of a significant property interest.” Sandv Beach Def. Fund v
City council, 70 Haw. 361, 378, 773 P.2d 250, 261 (1989). This
court has analyzed due process claims in two steps. See id. at
376, 773 P.24 at 260. The first question is whether the
particular interest sought to be protected by @ hearing is
“property” within the meaning of the due process clauses. Id.
If the interest is “property,” the second step involves
ascertaining the specific procedures required to protect the
interest. Ide

From what we can discern based upon the arguments of
the parties, Defendant identifies two interests constituting
property within the meaning of the due process clauses -~

possession of the leased premises and the rent to be paid into

4
 

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the trust fund, in this case, $20,633.20." Assuming, arquendo,
these interests are protected under the due process clauses, HRS
§ 666-21 does not offend due process inasmuch as tenants are
afforded an opportunity to challenge sunmary possession and
notions for the establishnent of a rent trust fund,
8

“Due process encompasses the opportunity to be heard at
@ meaningful time and in @ meaningful manner. Due process is
flexible and calls for such procedural protections as the
particular situation demands.” Kernan vw. Tanaka, 75 Haw. 1, 22,
856 P.2d 1207, 1218 (1993) (internal quotation marks and
citations omitted). With respect to possession as “property,”
the district courts have exclusive jurisdiction over the issue of
summary possession, see Kimball v. Lincoln, 72 Haw. 117, 125, 809
P.2d 1130, 1134 (1991), and may issue writs of possession
Pursuant to HRS § 666-11. See supra note 5. In this case,
Defendant was given notice with respect to possession of the

Property. As indicated supra, the question remaining is whether

Ae to Defendants’ due process claim, the State first contends that
there is no “deprivation of property" in the inetant case as {Defendants}
ald) no freestanding "leaseheia possessory right’ in the prenises independent,
of the Agreenent and its requiresent of monthly rent payments.” Based on
this, the State posits that (1) Defendants were “obligated to make the
March 1, 2002 [rent] payment,” (2) “failure to make that payment was admitted”
by Defendants, (3) said failure to pay "triggered the issuance of the sudgent
and weit of possession,” (4) and, because the “March ? payment date was
Selected by the Agreemont,” such payment date “id not require additronal,
notice or hearing by the court.”
‘Second, the State contends thet as to Defendants’ clain that

"possession was never provided" and due process Tequired a hearings “[1if

= possession was never provided, then the deprivation of the scontractval
jeasenold possessory rights’ and of the advance payments was effected
any S0urt Order anc by action cf » prigare gary” (aephases in origin

15

 

 

 

 

 

 

 

 
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the hearing afforded Defendant was sufficient. At the February
25, 2002 hearing, Plaintiff orally moved for the establishment of
a rent trust fund. Defense counsel had the opportunity to oppose
the motion and argued that “possession was never provided” to
Defendant. Our decision to remand, then, rests upon the
insufficiency of the court’s hearing.

In connection with continued possession of the
premises, HRS § 666-21 states that “the court shall order the
tenant to deposit any disputed rent as it becones due” and that
“the tenant shall not be required to deposit any rent where the
tenant can show to the court’s satisfaction that the rent has
already been paid.” (Emphases added.) Implicit in this language
is that rent must be “due” under any purported lease agreement
and that the tenant must have an opportunity to “show” the court
that the rent has already been paid. In this case, Defendant had
an opportunity to challenge Plaintiff’s motion for establishment
of the rent trust fund, but the court did not make a finding as
to whether Defendant was in possession of the premises to warrant
application of HRS § 666-21. But this error does not alter the
fact that HRS § 666-21 provides for, and Defendant was given,
notice and a hearing with respect to possession.

c

With respect to rent as “property,” HRS § 666-21 does
not preclude tenants from raising defenses to clains of rent due
and owing in the district court. HRS § 666-21 (a) states that
“(nlo deposit of rent . . . shall affect the tenant's rights to

16
 

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assert either that payment of rent was made or that any grounds
for nonpayment of rent exist under this chapter.” (Emphasi

added.) Also, HRS § 666-21(c) permits the court to “order

 

Payment of the money collected or portion thereof to the tenant
ifthe court finds that the rent is not due or has been paid. or
that the tenant had a basis to withhold, deduct, or otherwise set
off the rent not paid.” (Emphasis added.) Thus, HRS § 666-21
does not appear to preclude tenants from raising defenses to rent
at the time a request for the establishment of a rent trust fund
is made, but, rather, expressly preserves the tenant’s right to
assert that rent was paid or that grounds for nonpayment exist.”
Cf. Lumv. Sun, 70 Haw. at 296-97, 769 P.2d at 1096 (“The
defendant may now also have any counterclaim ‘arising out of and
referring to the land or premises, the possession of which is
being sought,’ other than a real action or one in which the title
to real estate comes in question, heard in the district court
along with the summary possession action even though the value of
the counterclaim may exceed the monetary limit for actions
ordinarily triable there.”) (quoting HRS § 604-5(a) (emphasis

added) (internal brackets omitted)).

 

 

© ong Cases cited By, Defendane de net support her position, but, rath

support the constifutionality of ARS § 666-21. See ease

1 9% Howai't 372, 388, S84 P.24 1198, 1218 (1999) {holding that oral
notice £6 local counsel ‘of possible revecat lon of ora hac vice status is
sufficient to conply with procedural due process); Beraan, 78 Haw. at 26, 656
P.2g at 1220 (coneluding that Hawaii's adeinieteative revocation of licenses
program adequately protects citizens from weongfal license, suspensions
inasmuch as "tinely Judicial review if available to correct any deficiencies
inthe process")

 

 

 

 

 

 

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Moreover, in this case, Defendant filed a demand for a

jury trial with respect to Plaintiff’s $42,500.00 plus damage
claim for unpaid rent. Hence, Defendant will presumably have an
opportunity to defend against Plaintiff's damages clain.
Accordingly, we cannot say that HRS § 666-21 violates due
process.

Our decision is consistent with the United states
Suprene Court decision in Lindsey v, Normet, 405 U.S. 56 (1972).
In Lindsey, the Suprene Court addressed the constitutionality of
the Oregon Forcible Entry and Wrongful Detainer Statute. Under
that statute, a tenant was required to pay accruing rent pending
judicial settlenent of its disputes with the lessor." See id.
at 63, 67. Lindsey held that inasmuch as the tenant is not
foreclosed from litigating its right to damages or other relief
by bringing @ separate action, the Oregon statute does not deny
due process of lav. See id, at 66-67. Similarly, under HRS §
666-21(a), the tenant may assert grounds for nonpayment of rent
and pursuant to HRS § 666-21(c), the court may require repayment
of rent collected if the court finds that the rent was not due,

was paid, or should be withheld, Also, as in this case,

M The statute at issue in Lindsey provided, in relevant part, as
Eeliowe

snuance shall be granted for a longer period than two
2 the defendant spplying therefor gives an

ing to the sdverse party with good and sufficient

security, to be approved by the court, conditioned for the

Payment of the rent that say accrue if judgment is rendered

against the defendant,

adsey, 405 U.S. at 60

   

    

 

 

Jed Statutes § 208.240).

 

[quoting oregon Re:

 
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defendants are not precluded from filing a request for a jury
trial on remaining claims of plaintiffs or any of their own
counterclaims “triable of right by a jury.” Lum, 70 Haw. at 297,
769 P.26 1097; see id at 290, 769 at 1093 (concluding that “the
[tenant] was entitled to a jury trial in the [circuit court] on
her claims, but the jury denand did not divest the district court
of pover to decide whether or not [the landlord) should be
restored to possession of the premises in question”). To
reiterate, in this case, Defendant moved for a jury trial. Any
defenses she raised to the rent have accordingly been transferred
to the circuit court. ‘Thus, because tenants, including
Defendant, have “an opportunity to present every available
defense[,]” Lindsey, 405 U.S. at 66, HRS § 666-21 comports with
the due process clauses of the state and federal constitutions.
>.

Defendant also asserts an equal protection claim,
arguing that HAS § 666-21 impermissibly “discriminates between
those renters who can afford rent trust fund deposits and those
who cannot, as a requirenent for receiving a trial on the merits
of the possessory issues.” strict scrutiny is ordinarily

applied where lawe involve suspect classifications or fundamental

 
 

Ac to Defendants’ equal protection clain, the State maintains that
“the lesitinate, non-diseriminatory rations) government purpose underlying the
(statute ie to] saintain the cratus quo” during the "unpredictable" and
“iikely Iengthy" legal proceedings initiated to rescive the landiord-tenant
Gispuce. In the comercial context, ‘the State reasons that "(tlhe status quo

aintaines cecause the landlord continues to provide the leased premises,
and the tenant continues to pay the agreed-upon rent." Because rent paynent
ie-made to the court, the State argues that Such payment "may be returned in
wisle or in part to the tenant at the conclusion of she entire

 

 

 

 

as
 

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rights. See Bachr v. Lewin, 74 Haw. 930, 571, 852 P.2d 44, 63

(1993). However,

daser this standard, to prevail, a party challenging the
constitutsonslity of a statutory classification on equal
protection grounde has the burden of snowing, with
‘convincing Clarity that the classification 14 not rationally
kelated to the statutory gurpose, or that the challenge
Classification does not Test upon some ground of difference
having a fair and substantial relation to the object of the
legislation, and is therefore net arbitrary and capricious.

Sandy Beach Def, Fund, 70 Haw. at 380, 773 P.2d at 262 (citations
omitted) (emphases added). See State v, Hatori, 92 Hawai'i 217,
225, 990 P.2d 115, 123 (App. 1999) (“If a suspect classification
or fundamental right is not involved, our inguiry of an equal
protection claim is whether there is a rational basis for the
challenged statute.”). Defendant does not argue that tenants
constitute a suspect class. Rather, she maintains that HRS

§ 666-21 impinges upon a fundamental right, that is, the right to
notice and hearing.

‘This court has observed that a right is fundamental if
it “is of such a character that it cannot be denied without
violating those ‘fundamental principles of liberty and justice
which lie at the base of all our civil and political
institutions.’” Baehr, 74 Haw. at 556, 852 P.2d at 57 (quoting
Griswold v, Connecticut, 381 U.S. 479, 493 (1965) (Goldberg, J.,
concurring)). In other words, a right is fundamental if it is
“so rooted in the traditions and collective conscience of our

people that failure to recognize it would

 

olate the fundamental
principles of liberty and justice that lie at the base of all our

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civil and political institutions.” Id. at 986-57, 852 P.2d at
57. By arguing that notice and hearing are fundamental rights,
Defendant confuses procedural due process principles with
substantive due process principles. As discussed previously, the
Fight to notice and hearing is a procedural due process right
and, hence, is not a “fundamental right” subject to strict
scrutiny. Therefore, the rational basis standard of review
applies to Defendant's equal protection claim.

“Under the rational basis test, ve inquire as to
whether [HRS § 666-21] rationally furthers a legitimate state
interest.” Id. at 572, 852 P.2d at 64. Defendant fails to cite
any case law or legislative history to support its position that
HRS § 666-21 does not meet rational basis review. In Lindsey,
the Supreme Court apparently employed the rational basis test.
See 405 U.S. at 74 (stating that “since the classification under
attack is rationally related to [the purpose of the statute), the
statute is not repugnant to the [e]qual [p]rotection [c]lause of
the Fourteenth Amendment”) (emphasis added). It held that the
statute withstood equal protection challenge based upon the
“unique factual and legal characteristics of the landlord-tenant
relationship that justify special statutory treatment
inapplicable to other litigants.” Id, at 72. According to the
Supreme Court,

che tenant is, by definition, in possession of she

 

 

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Many expenses of the landlord{)
Eontinve to accrue whether s tenant pays his rent or not.

Heading over by the
Eenant beyond the term of his agreement or holding without
payment of rent has proved a virulent source of friction and
Bigpute.

 

Id, at 12-73 (emphases added). ‘The interest in “speedy
adjudication . . . to prevent subjecting the landlord to
undeserved economic loss and the tenant to unmerited harassment
and dispossession” sanctioned by the Supreme Court coincides with

the underlying objective of $ 666-21, which, as previously noted,

 

is to maintain the status quo -~ simultaneously providing
landlords with an expeditious alternative to eviction proceedings
and tenants with an opportunity to maintain possession so long as
rent is paid when properly due. The imposition of a rent trust

fund

 

requiring tenants to pay rent in exchange for possession
for the duration of the dispute -- appears rationally related to
achieving this statutory purpose. Inasmuch as a rational
relationship exists between these objectives and the rent trust
fund, we hold that HRS § 666-21 does not violate the protections
guaranteed by the equal protection clauses.

van.
For the foregoing reasons, the court's March 5, 2002

judgment for possession and writ of possession are vacated and

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the case is remanded for a hearing on whether Defendant had

possession of the property.

Gary Victor Dubin for
defendants-appellants. Y
carolyn Schnack (Paul 4. Blase Alarinnen

Dold on the brief) for
plaintiff-appellee.

Dorothy Sellers, Deputy =<
Attorney General, on the > \
brief for Amicus Curiae -

State of Hawai'i.