Opinion ID: 1210221
Heading Depth: 1
Heading Rank: 1

Heading: The Standing of a General Creditor to Contest the Amount Due a Mortgagee in a Foreclosure Proceeding.

Text: Hawaii National Bank argues that American Security Bank had no standing to contest its claim against Akamine & Sons. Hawaii National Bank contends that once it was determined that only two of the loans of American Security Bank were secured, American Security Bank's only interest in the remainder of the foreclosure proceeds was as a general creditor, and that general creditors have no standing to intrude in a foreclosure proceeding. For that proposition, Hawaii National Bank cites a string of early cases, all of which pre-date the adoption of our liberal rules on joinder of actions and class actions. See, e.g., Wightman v. Evanston Yaryan Co., 217 Ill. 371, 75 N.E. 502 (1905); Clinton v. South Shore Natural Gas & Fuel Co., 61 Misc. 339, 113 N.Y.S. 289 (Sup.Ct. 1908); Herring v. New York, L.E. & W.R. Co., 105 N.Y. 340, 12 N.E. 763 (1887); Bruce v. Sugg, 109 N.C. 202, 13 S.E. 790 (1891); Tompson v. Huron Lumber Co., 4 Wash. 600, 30 P. 741, 31 P. 25 (1892). Those cases are based on the premise that a general creditor does not have an immediate and present interest in a foreclosure suit. Clinton v. South Shore Natural Gas & Fuel Co., 61 Misc. 339, 113 N.Y.S. 289, 292 (Sup.Ct. 1908). The fallacy of that premise is made obvious by the facts of this case. Akamine & Sons, Ltd., is liable to American Security Bank for certain debts which are not covered by mortgages. Akamine & Sons is bankrupt and has no interest in this litigation. Only Akamine & Sons' creditors care whether Hawaii National Bank receives more than is due it on its mortgages. Whatever Hawaii National Bank receives will decrease the amount available to the general creditors. Their interest in the case is real and immediate. The fear that multitudes of general creditors would attempt to intervene is not compelling. Where that fear becomes a reality, a court would be justified under our rules to exercise its discretion to make the action manageable. This result is fairer than simply allowing the secured creditor to receive in default whatever he requests. While Akamine & Sons' trustee in bankruptcy could have contested the amount due Hawaii National Bank, and while American Security Bank might have requested that it be appointed trustee to represent Akamine & Sons, American Security Bank has a real and substantial interest of its own which justifies its participation in the litigation. Thus, the trial court's decision allowing American Security Bank to contest the amount owed Hawaii National Bank is affirmed. [2]