Court Opinion

ID: 9548807
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:08:58.508095+00
Date Added: 2024-06-11T15:19:26.429697
License: Public Domain

DISSENTING OPINION BY
MIZUHA, J.
I respectfully dissent. The controversy, according to the submission, “relates to the meaning of the phrase The taxes referred to in Section 0-1 (c)’ as used in the portion of subsection (a), Section P-8 of The Agreement * * But Section 0-1 (c) actually involves two types of taxes, taxes “paid” by Bishop and taxes “payable” by Bishop. The parties state in their submission that the “question *232in difference * * * is when, and under what conditions, BISHOP is entitled to reimburse itself for the $57,033.42 taxes paid by it on Koko Kai Unit 1 from January 1, 1962 (the Tax accumulation date’) through June 30, 1963, inclusive.”
Bishop contends that “it may reimburse itself the entire amount out of any monies received by it with respect to any lots anywhere leased pursuant to The Agreement * * Hawaii Kai contends “that BISHOP cannot recoup property taxes respecting any lot until a lease thereof has been made, and then it is only entitled to be reimbursed for real property taxes paid with respect to the lot in question for the period January 1, 1962 until the date of the lease out of rentals received for the lot in question.” The case was argued on October 22, 1965, and following a vacancy in the court was resubmitted to the court as constituted by the assignment of a circuit court judge to fill the vacancy on January 26, 1966. The only information available in support of Bishop’s contention are figures as of June 30, 1963 showing “BISHOP had paid $110,109.10 real property taxes on lots subject to The Agreement after their respective tax accumulation dates, and had received $82,487.50 in rents from lessees under The Agreement. * * *” This information is too limited in scope. It should have been brought up to date at the time of the hearing, and should have included the following facts which have definite bearing in determining the parties’ intent in Sections F-8(a) and C-l(c) :
(1) Number of tracts developed.
(2) Number of lots developed.
(3) Number of leased lots.
(4) Rentals received from leased lots.
(5) Basic rentals available to Bishop prior to payment of taxes on unleased lots.
(6) Rentals available to Hawaii Kai prior to pay-*233meat of taxes on unleased lots.
(7) Number of unleased lots after tax accumulation date.
(8) Taxes “paid” by Bishop on unleased lots after tax accumulation date.
(9) Taxes “payable” by Bishop on unleased lots after tax accumulation date.
(10) Taxes “payable” by Bishop under proration clause on leases executed after tax accumulation date.
(11) Number of tracts and lots in the development stage.
Bishop argues that “The Agreement as a whole gives Bishop the right to pay real property taxes under Section C-l(c) out of all monies received from lessees.” (Emphasis added). It is impossible to construe The Agreement as a whole absent the information noted above. As I view it, the controversy does not relate to the meaning of the “taxes referred to in Section C-l(c)” used in Section E-8(a), as stated in the submission. It relates to the accounting method used in Section F-8(a) for the payment of “the taxes referred to in Section C-l(c).” The “question in difference” as stated in the submission is too narrow and limited. There are two questions: Under the accounting method outlined in Section F-8(a), (1) is Bishop entitled to reimburse itself for taxes “paid” on an unleased lot from any monies received from lease rentals, or restricted to reimbursement from rentals received from that particular lot after the lot is leased, and (2) is Bishop authorized to pay taxes “payable” on an unleased lot from any monies received from lease rentals, or restricted to such payment from rentals received from that particular lot after the lot is leased? Moreover, these two questions must be considered simultaneously with the accounting method for the payment of basic rentals *234under Section F-8(b).
The agreed statement of facts as submitted is too limited to intelligently resolve these questions. The schematic development of the entire area must be thoroughly examined first before a conclusion can be reached as to what the parties intended as the proper accounting procedure for “taxes referred to in Section C-l (c).” The submission controls the issue and this court cannot go beyond the question raised by the parties. Oleson v. Borthwick, 33 Haw. 766, 794; Honolulu Rapid Transit Co. v. Hawaiian Tramways Co., 13 Haw. 363, 377, appeal dismissed, 191 U.S. 565 (1903).
The submission was also inadequate in this respect. The Agreement for the development of the land was made a part of the submission. To construe The Agreement as a whole, the construction accorded other paragraphs of The Agreement is needed to determine the “question in difference.” This was contemplated by the parties, and they did state in the submission that “all facts which the parties deem relevant to the controversy have been set forth,” the parties reserving “the right to argue that some of the facts are immaterial and irrelevant.” However, it was evident during argument that the parties disagreed as to essential facts which I believe have a bearing on the “question in difference.” Essential facts must be agreed to, and “this court, under the terms of the statute, is without authority to consider any matter [sic] of fact which are not agreed to by both parties to the cause.” Oleson v. Borthwick, supra, 33 .Haw. at 794, “* * * the parties, prescribe the limits of judicial inquiry by the agreed statement of facts. The court is not bound nor expected to go beyond the questions raised by the parties.” Honolulu Rapid Transit Co. v. Hawaiian Tramways Co., supra, 13 Haw. at 377. The submission controls the issues. Bishop v. Mahiko, 35 Haw. 608. Accordingly, this court should *235“in its discretion, require the case to be first submitted to a circuit judge at chambers subject to appeal,”1 where all the essential facts would then be required and available, and The Agreement considered as a whole to determine whether Bishop has the right under Section E-8(a) to pay the taxes referred to in Section C-l(c) from all monies received from lease rentals.
Inasmuch as the majority has assumed that the submission is in order and has proceeded to adjudge the case on its merits, it is necessary that I note my views on the “question in difference.” They are partially based on an interpretation of other paragraphs of The Agreement as well as facts and assumptions which were not included in the submission.
Under C-l(c) Bishop must pay taxes on any residential lot in any subdivision not leased before the tax accumulation date, and these payments are not subject to reimbursement from lease rentals. But, although Bishop must pay all taxes when they fall due on all lots in any subdivision from the tax accumulation date to the date they are leased if monies are unavailable under Section F-8(a), Bishop is entitled to reimbursement under the provisions of Section F-8(a). (Emphasis added). Section F-8 provides that:
“* * * All monies received by BISHOP with respect to one or more Lots covered by any lease or leases thereof made pursuant hereto with parties other than HAWAII KAI or organizations controlling it or controlled by it shall be accounted for by BISHOP in accordance with good accounting practice and shall be paid out in the following order:
“(a) Real property taxes, public improvement assessments, sewer charges (public and private) and *236other similar charges, if any, against the Lot or Lots in question, and the taxes referred to in Section C-l(c), shall be .paid to the public authority or other party entitled thereto before delinquent, and in any event the amounts collected from lessees or others during each fiscal year by BISHOP for any of the foregoing expenses shall be paid out by BISHOP prior to the expiration of such fiscal year of BISHOP.”
The monies referred to in Section F-8(a) refer to all monies received by Bishop from outstanding leases of residential, apartment, hotel and commercial lots in any subdivision. First priority on said receipts shall be the payment of (1) “real property taxes * * * if any, against the Lot or Lots in question * * * to the public authority * * * entitled thereto before delinquent, * * *” and (2) “the taxes referred to in C-l(c) * * *' to the public authority * * * entitled thereto before delinquent * * *.” Section F-8(a) calls for the payment of two categories of real property taxes. In order to understand these categories, reference must be made to other parts of The Agreement and the tax collection statute.
First, the lessee pays the taxes, but “such lease shall provide for the proration of accrued taxes between the lessee and BISHOP * * *.” (Section C-l of Agreement).
Second, section 128-32, R.L.H. 1955, as amended, provides for the first one-half payment of real property taxes on June 10 and 25, and the second one-half payment of real property taxes on November 10 and 25 of each year.
Third, taxes under C-l(c) between the tax accumulation date which is always January 1, and the date a lot is leased, may be paid by Bishop for one-half year or may not be paid at all. For example: A lot is leased on April 1 after the tax accumulation date. Under the proration clause for leases, Bishop is responsible for the payment of taxes for the first three months. Taxes are due on June *23710th. But the first three months’ taxes are payable from lease receipts under F-8(a).
Fourth, under C-1(a) and (b), the tax accumulation date can be anywhere from 6 to 24 months after the subdivision is completed. The lot may be leased 6 to 24 months before the tax accumulation date, and under the proration clause for leases, Bishop must pay the prorated taxes which are not subject to reimbursement under C-l(e). This payment is not to be treated as paid out under Section E-8(a).
Fifth, in C-1(c), the word “paid” in phrase “paid or payable by Bishop” refers to taxes that are actually paid on the due date on unleased lots, and “payable” refers to unpaid taxes on unleased lots that are the responsibility of Bishop as well as taxes under the proration clause for leases executed after the tax accumulation date.
The first category of real property taxes required to be paid in P-8 (a) from the lease rentals before they are delinquent are those taxes which have been prorated at the time a lot is leased after the tax accumulation date. These taxes are “payable” by Bishop under C-1(c) but not actually paid since the tax payment date occurs at a later date. It is assumed that lease rentals are payable in advance. Representative copies of executed leases for residential and apartment, hotel or commercial lots were not submitted with the agreed statement.
The second category is the payment of real property taxes “referred to in Section C-1(c).” What are these taxes? There are two parts to C-1(e) which read “taxes paid or payable by Bishop.” It is clear that the second part of the phrase, taxes “payable” are taxes on unleased lots from the tax accumulation date, these taxes to be paid as provided for by Section P-8 (a) before delinquent. The phrase “BISHOP shall be entitled to reimbursement for such taxes with respect to the Lot in question” refers *238to taxes “paid” in the first part of the phrase, and is not applicable to taxes “payable” because the question of reimbursement arises only after Bishop actually pays the taxes.
With reference to the first part of the phrase “taxes paid,” Bishop must pay from its own funds taxes on unleased lots only if monies are not available under Section F-8(a). Whatever taxes Bishop may have actually paid on unleased lots from the tax accumulation date as specified in Section C-l(c), it is entitled to reimbursement under F-8(a). As I construe this Agreement, there will be taxes in this classification in the first one or two or three subdivisions where Bishop may have to pay any taxes on unleased lots after the tax accumulation date. Thereafter the question of reimbursement will not arise since there would be lease rentals sufficient to cover all taxes payable under F-8(a). As noted above there is a 6 to 24-month period before the tax accumulation date during which lots are to be leased for rentals payable in advance. Therefore, the possibility of Bishop actually paying taxes for unleased lots after the tax accumulation date may occur only in the first, or second, or third subdivision of the Hawaii Kai development. This would be clearly evident if the agreed statement had been amended at the date of the hearing by including the information noted earlier in this opinion as essential for a fair determination of the “question in difference.” As previously stated, a full hearing before a circuit judge is the only practical manner to determine the “question in difference.”
I can find nothing in C-l(c) wherein it states that reimbursement for taxes paid on each specific unleased lot shall come only from the lease rental of the specific lot after it is leased. The reference in C-l(c) to “Lot in question” has no significance and does not determine the source of money from which Bishop is to be reimbursed. *239The phrase merely identifies the particular lot on which taxes are to be “paid or payable” by Bishop. The payment provisions of all monies received by Bishop are found in Section F-8(a) which mandates the payment of taxes on unleased lots before any other payments are made. Section F-8(a) does not provide for reimbursement to Bishop from lease rentals on a lot by lot basis for taxes paid, nor deferment of reimbursement for taxes paid on each unleased lot until such lot is leased.
If the construction in the majority opinion of Sections C-l(a), (b) and (c) andF-8(a) is followed, basic rentals must also be accumulated and a ridiculous situation would exist. Every subdivision has a few lots in locations that are unattractive and difficult to lease. It would take years before the accumulated taxes are paid and an additional number of years before the accumulated basic rentals are paid. Can it be said that this was intended by the parties in a development agreement, when the owners of the land are trustees of an eleemosynary trust? What about interest on the advance on taxes? In the absence of any mention of interest in The Agreement, will it follow that reimbursement Avould include the legal rate of interest? Since interest on advance payments is not mentioned, isn’t it reasonable to contend that the disbursement provisions of F-8(a) are controlling, and that it was contemplated that the collection of lease rentals in the over-all development was sufficient to pay all taxes on unleased lots before delinquent, still leaving a balance not only to pay basic rentals under F-8(b) but also to pay Hawaii Kai under F-8(c) after deducting basic rentals in F-8 (b) ?
By requiring Bishop to wait until a lot is leased before it begins to recoup taxes it has paid on the unleased lot from the lease rentals, Hawaii Kai receives an unprecedented windfall. Hawaii Kai has the exclusive right to determine the amount of the Lot Development Pay*240ment for each Lot and is entitled to receive the entire amount thereof from the lessee. In the event the payment is not paid in full by the lessee to Hawaii Kai at the time the lease is executed, “HAWAII KAI shall have the right to take a note or other evidence of indebtedness in favor of HAWAII KAI, signed by the lessee, providing for payment of all or a portion of such Lot Development Payment in installments over such period and including interest on deferred balances as shall be acceptable to HAWAII KAI.” In no event does Bishop receive more than 40% of the annual rental, and in some cases only 30%, 20% and 10% for the first 30 years, the balance going to Hawaii Kai.
If the majority view is accepted, Hawaii Kai, receiving rentals from the land in greater percentages than Bishop immediately after the execution of leases, can apply these rentals to immediately pay off lot development costs of unleased lots and recoup them later when the lot is leased. But Bishop, the owner of the lots, on the other hand, is unable to apply lease rentals from other lots to pay taxes on unleased lots. Hawaii Kai does not have to pay interest on these payments. Hawaii Kai does not have to worry about recoupment of lot development costs on unleased lots because these costs must be paid by the lessee if and when the lot is leased, and this can be an indefinite period after the termination of The Agreement. Furthermore, the Lot Development Cost can include interest because Hawaii Kai has the exclusive right to determine the amount of this cost. Likewise, Hawaii Kai, after the lot is leased and accumulated taxes and accumulated basic rentals are paid, will receive the difference between the fixed annual rental and the basic rental for the first 30-year period of the lease, which may be 30 or 40 years after the termination of The Agreement.
Judgment should be entered declaring that Bishop is *241entitled to reimburse itself for sums which it may have “paid” for taxes on unleased lots from lease rentals received from lessees of other residential, apartment, hotel and commercial lots, other than Hawaii Kai or organizations controlling it or controlled by it, and from said lease rentals to first pay all real property taxes “payable” on unleased lots in any subdivision under the provisions of P-8 (a).

 Section 227-1, R.L.H. 1955.