Opinion ID: 2614170
Heading Depth: 1
Heading Rank: 1

Heading: facts

Text: 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 Development. It 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 the 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.