Opinion ID: 402238
Heading Depth: 4
Heading Rank: 1

Heading: Relevant Hawaii Law

Text: 49 The law of other jurisdictions varies as to the effect of a deed absolute on its face coupled with a repurchase option. See Swallow Ranches, Inc. v. Bidart, 525 F.2d 995, 997-98 (9th Cir. 1975) (collecting cases and authorities). The Hawaii cases, however, do not disclose any similar uncertainty on this question. All reported cases bearing on the issue either support or are consistent with the position that the 1971 transaction was a mortgage. 50 In Makuakane v. Tanigawa, 50 Haw. 493, 443 P.2d 153 (1968), the court was faced with an instrument which contained an absolute conveyance in one portion, and in the other portion the following proviso: 51 PROVIDED HOWEVER; if the sum of One Hundred Ten ($110.00) Dollars is paid in full within one (1) year ... then this conveyance shall be of no force and effect. 52 Id. at 494-95, 443 P.2d at 154. The court observed: 53 The instrument is basically in the same form as modern mortgages drafted in this jurisdiction. That is, a mortgage usually contains an outright or absolute conveyance to a mortgagee with a disfeasance clause whereby it is stated that upon the payment of a certain sum of money the deed shall become null and void. The law is clear that where an absolute conveyance contains a disfeasance clause, the instrument is a mortgage. 54 Id. at 495, 443 P.2d at 155 (emphasis added). 55 Under Hawaii law it does not matter whether the disfeasance clause appears on the face of the deed, on a separate writing, or even in a mere oral agreement. Kahau v. Booth, 10 Haw. 332, 333-34 (1896). Kahau involved a deed absolute on its face, and a simultaneously executed repurchase option on a separate page. The court held that the transaction was a mortgage. 10 See also Chave v. Dowsett, 6 Haw. 221 (1878). While Kahau is indeed an old case, appellees have cited no Hawaii case which overrules it or even questions its authority. It was cited as precedent in Makuakane, supra, 50 Haw. at 495, 443 P.2d at 155. It was also cited and explained in Kawauchi v. Tabata, 49 Haw. 160, 170, 413 P.2d 221, 227 (1966). Kawauchi itself also directly supports the conclusion that the transaction here was a mortgage. Kawauchi involved a deed absolute with a leaseback and an option for the lessee to purchase the property. The transaction was held to be a mortgage, not a sale. 49 Haw. at 180, 413 P.2d at 232. 56 Appellees cite several cases in support of their contention that there is a heavy presumption in favor of interpreting such transactions in accordance with their form. Brief of Louis at 37. None of those cases help appellees, although they do illustrate the fact that the law varies from one jurisdiction to another on this point. Swallow Ranches, Inc. v. Bidart, 525 F.2d 995 (9th Cir. 1975), actually holds that the substance of the transaction and the intent of the parties is controlling, not the form. 525 F.2d at 998. But more important, the case construes and applies Nevada law and has no bearing on the issue here. Rizo v. MacBeth, 398 P.2d 209 (Alaska 1965), was concerned with the direct reformation of a deed. There is no mention in the case of any repurchase option or agreement, and no discussion of what effect such an agreement might have. And the case deals with Alaska law. Blue River Sawmills, Ltd. v. Gates, 225 Or. 439, 358 P.2d 239 (1960), declined to find a mortgage, observing that the test is whether there is an unsatisfied indebtedness owing the grantee which is enforceable independent of the deed. Id. at 460, 358 P.2d at 249. But this test is explicitly rejected in Kawauchi, supra, 49 Haw. at 172-76, 413 P.2d at 228-30. Blue River Sawmills is thus not a reliable guide to Hawaii law. Glasgow v. Andrews, 129 Cal.App.2d 660, 277 P.2d 400 (1954), turned on a factual dispute regarding the intention of the parties; the affirmance by the California Court of Appeals of the trial court's finding that a sale was intended does not shed light on the legal issue presented here. 57 We note that many jurisdictions regard the intent of the parties to be the controlling factor in determining whether a transaction is a sale or a mortgage. See, e.g., Swallow Ranches, Inc. v. Bidart, supra, 525 F.2d at 997-98 (collecting cases). This is the rule in Hawaii as well. See Haw.Rev.Stat. § 506-1(a) (1976) (Every transfer of an interest in real property ... subject to disfeasance upon the payment of an obligation ... is to be deemed a mortgage ....); Hess v. Paulo, 38 Haw. 279, 285-86 (1949) (construing former Haw.Rev.Stat. § 8871 (1945), now codified at § 506-1) (purpose of rule is to ensure effectuation of the genuine purpose and intention of the parties by subordinating thereto the ostensible form in which the transaction is finally couched). See also Kawauchi, supra, 49 Haw. at 170-71, 413 P.2d at 227; Ah Chong v. Kaluahine, 9 Haw. 571, 574 (1894). In the instant case, however, there is no indication in the record that the bankruptcy court engaged in any analysis of the facts which would bear on the intent of the parties and the true substance of the transaction. Instead, the court seems to have based its determination on the form of the transaction alone.