Court Opinion

ID: 9598757
Source: CourtListenerOpinion
Date Created: 2023-08-22 01:11:32.583313+00
Date Added: 2024-06-11T15:25:20.740717
License: Public Domain

*191DISSENTING OPINION OF
WIRTZ, J.
I find myself unable to agree with the conclusion reached by the majority of the court “that the true nature of the transaction was a loan, and that the finding to the contrary was ‘clearly erroneous’ and reversible under H.R.C.P., Rule 52(a) for the reasons” set forth in the opinion of the court.
By their petition plaintiffs sought to reform the deed and lease with option to repurchase into a mortgage. While such a transaction may be declared to be a security agreement there is a strong presumption that a duly executed, notarized and recorded deed and lease purport to be what they appear to be. Proof negating their obvious nature must be strong, clear and convincing. Bogk v. Gassert, 149 U.S. 17, 28-29; Johnson v. National Bank of Commerce, 65 Wash. 261, 118 Pac. 21, 23. Cf., Wallace v. Johnstone, 129 U.S. 58, 64; Coyle v. Davis, 116 U.S. 108, 112; Blue Rimer Sawmills, Ltd. v. Gates, 225 Or. 439, 358 P.2d 239, 243; Elling v. Fine, 53 Mont. 481, 164 Pac. 891; Parks v. Mulledy, 49 Idaho 546, 290 Pac. 205, 207; Sargent v. Hamblin, 57 N.M. 559, 260 P.2d 919, 927; Robison v. Moorefield, 347 Ill. App. 508, 107 N.E.2d 278, 285. See, Leong Kau v. Monting, 7 Haw. 415, 416. See generally, 1 Jones, Mortgages, §§ 294, 295 and 332 (8th ed. 1928). Where a conveyance is absolute in form with an option to purchase, one asserting that it is a loan must establish that fact by evidence which is clear and convincing, and whether the evidence received *192is such is usually a question of fact for the trial court and upon conflicting evidence it is not ordinarily open to review on appeal. Spataro v. Domenico, 96 Cal. App. 2d 411, 216 P.2d 32 (Dist.Ct.App.).
There is general agreement that in order to determine whether a deed absolute on its face together with an agreement of reconveyance constitute a mortgage or a conditional sale depends entirely on the intention of the parties at the time of the consummation of the contract. Conway’s Executors v. Alexander, 11 U.S. 218; Annot., 79 A.L.R. 937 (1932).
The concern of the majority about usury which affects the result reached is misplaced in putting the cart before the horse unless the true intent of the parties spells out a security transaction. Chief Justice Marshall, in Conway’s Executors v. Alexander, supra, 11 U.S. 218, 236-237, early affirmed the policy of carrying out the true intent of the parties where there is a question whether the transaction entered into was an absolute sale with a right of repurchase or one entered into to secure a loan:
“To deny the power of two individuals, capable of acting for themselves, to make a contract for the purchase and sale of lands defeasible by the payment of money at a future day, or, in other words, to make a sale with a reservation to the vendor of a right to repurchase the same land at a fixed price and at a specified time, would be to transfer to the Court of Chancery, in a considerable degree, the guardianship of adults as well as of infants. Such contracts are certainly not prohibited either by the letter or the policy of the law. * * * But as a conditional sale; if really intended, is valid, the inquiry in every case must be, whether the contract in the specific case is a security for the re-payment of money or an actual sale.”
*193The intent of parties is a question of fact1 and findings as to the intent of the parties come within the scope of the “clearly erroneous” rule under H.B.C.P., Buie 52(a). United States v. Yellow Cab Co., 338 U.S. 338, 341. The “clearly erroneous” rule (H.B.C.P., Buie 52(a)) is not limited to findings based solely on testimony involving the credibility of witnesses but encompasses findings based on all types of evidence including inferences drawn from documents and writings. United States v. U. S. Gypsum Co., 333 U.S. 364, 394.
A finding is “clearly erroneous” when the reviewing court in considering the entire record is left with the definite and firm conviction that a mistake has been committed. Ikeoka v. Kong, 47 Haw. 220, 225, 386 P.2d 855.
In considering factors reflecting the intent of the parties the majority recognizes that the absence of personal liability, while not conclusive, is a factor strongly indicative of a conditional sale. However, greater emphasis is placed on the discrepancy between the value of the property and the purported sales price as pointing to a mortgage. While this price, set by plaintiff for his own convenience and regarded by defendants as “a steal,”2 may appear inadequate as compared with the value of the property, still this inadequacy of the consideration remained only a factor to be considered in determining the intention of the parties. The majority minimizes the conduct and expressions of the parties which are the best indications of intent; the factors considered being *194merely aids to ascertaining intent where the same is unclear.
The note of March 24, 1958, and accompanying mortgage, as explained by the covering letter of March 24, 1958, which the majority say the trial judge erred in not considering, as they “colored the entire transaction,” indicate that the mortgage and note was “a purely temporary arrangement” so that foreclosure could be forestalled and that “the true arrangement or agreement between us” was to be evidenced by a deed and lease with option to repurchase.3 This points to a conditional sale, which the parties were perfectly free to make, rather than a security transaction.
The majority concedes that the testimony of plaintiff Toichi Kawauchi was hardly worthy of credit when he sought to establish that the transaction was instigated by others than himself. It is no wonder then that the testimony of plaintiffs (who were in straitened circumstances simply through their own greed) was not considered worthy of belief by the chancellor on all material matters concerning the nature of the transaction. . ,
The record shows that plaintiff Toichi Kawauchi, with knowledge that he could not secure a loan in view of his general bad reputation as a debtor, intended a sale from the outset. His agent Ahuna understood that he had been specifically instructed to sell the property with a lease containing an option to repurchase and sought legal assistance to properly carry out the instructions given him by his principal. The letter of March 24, 1958, addressed to the defendants and signed by plaintiffs refers to a deed and lease with option to buy back the property as the “true arrangement or agreement between us.” Plaintiffs’ *195then attorney, who drafted the documents involved, fully explained the nature of the transaction to them as one of conditional sale.
Not only did the plaintiffs intend a conditional sales transaction but their actions subsequent to the consummation of the transaction confirm this intent and are inconsistent with the present claim of ownership. Around October of 1958 plaintiff, Mr. Kawauchi, engaged as his attorney a very prominent and reputable attorney who on his behalf addressed a letter of July 7,1961 to defendants requesting a six months’ extension of the option period, offering to pay the sum of $12,000 for such extension, thus placing a value on the option to repurchase, comparably more than the premium originally set for repurchase. The attorney in question, whose repute in legal circles is well known, could hardly have written such a letter on behalf of his client unless, after ascertaining the true nature of the transaction, he considered it a sale subject only to the option to repurchase. Plaintiff, Mr. Kawauchi, in seeking the advice of eminent counsel before making this declaration of his understanding of the transaction cannot now find solace in ignorance of the law.
Plaintiffs’ possession of the property was only natural under its lease as tenants and they recognized the ownership of defendants in their request to have the rezoning application signed by them.
It is not disputed that the defendants throughout considered the transaction to be one of a sale with an option to repurchase embodied in the lease back to the plaintiffs. That the defendants never considered that they were making a loan is understandable as they were not in the loan business and there existed no reason, through relationship, friendship or otherwise to make a loan to one whose credit was bad and who could not obtain financing from any regular loan institution. It is difficult to imagine *196that the defendants who are all professional men would want to loan moneys and assume the headache of foreclosure upon default against a person who was even then in default in a foreclosure action.
While the court’s allowance of interest on the defendants’ investment is a more equitable result than that sought by the plaintiffs, still I do not feel at liberty to use the equitable remedy of reformation to flaunt the clearly expressed intention of the parties to the transaction as one of conditional sale.
Even if the testimony of plaintiffs could be believed that they intended the transaction to be one of security only, it has been held that before a deed absolute on its face can be declared to be a security instrument a court must have found that it was the mutual intent of the parties that the instrument have that effect. Glasgow v. Andrews, 129 Cal. App. 2d 660, 665, 277 P.2d 400 (Dist. Ct.App.); Sargent v. Hamblin, supra, 57 N.M. 559, 260 P.2d 919, 926; Rizo v. Macbeth (Alaska), 398 P.2d 209, 212; Wehle v. Price, 202 Cal. 394, 260 Pac; 878; Cousins v. Crawford, 258 Ala. 590, 63 So. 2d 670, 677. The defendants certainly never concurred in any such intent as now conveniently testified to by plaintiffs.
While, had I been the trier of facts, I personally might not have arrived at the conclusion reached by the trial judge in this case, I cannot see my way now to disturb his decision as being “clearly erroneous.” Where the evidence can support two diametrically opposed conclusions dependent on credibility, the trial judge’s choice between the two permissible views of the Aveight of the evidence is not “clearly erroneous.” Re Land Title, Wong, 47 Haw. 472, 391 P.2d 403, 406; United States v. Yellow Gab Co., supra, 338 U.S. 338, 342; United States v. 47 Bottles, More or Less, 320 F.2d 564, 571 (3rd Cir. 1963); McSorley’s, Inc. v. United States, 323 F.2d 900, 902-903 (10th *197Cir. 1963); Homestake Mining Co. v. Mid-Continent Exploration Co., 282 F.2d 787, 797 (10th Cir. 1960); Spencer v. Young (Fla.), 63 So. 2d 334, 335.
Plaintiffs also complain that it was error to admit the testimony of their attorney Thomas Flynn and to rely upon that testimony in deciding adversely to them. While the trial judge did indicate that he had considered this testimony, it cannot be said that he necessarily placed “substantial reliance” on it in resolving the case as it is clear that he considered all the other relevant matters in arriving at his decision.
It is not disputed that an attorney’s communications to a client are within the privilege arising from the confidential nature of attorney-client relationship. Russell v. Second Nat. Bank of Patterson, 136 N.J.L. 270, 55 A.2d 211, 217; I.E.S. Corp. v. Superior Court, 44 Cal. 2d 559, 564, 283 P.2d 700, 703-704; Jenkinson v. State, 5 Blackf. 465 (Ind. 1840). However, a client who testifies to part of the confidential communication in question waives the privilege (Steen v. First Nat. Bank, 298 Fed. 36, 41 (8th Cir. 1924); United States v. Goo, 10 F.R.D. 332, 335 (D.Haw. 1950); People v. Ottenstror, 127 Cal. App. 2d 104, 273 P.2d 289, 293 (Dist.Ct.App.); Leverich v. Leverich, 340 Mich. 133, 137, 64 N.W.2d 567; Rodriguez v. State, 130 Tex. Cr. 438, 94 S.W. 2d 476, 479), and this is true even if such testimony has been elicited from the witness client on legitimate cross-examination. Steen v. First Nat. Bank, supra, 298 Fed. 36, 41-42; Raleigh & C.R. Co. v. Jones, 104 S.C. 332, 88 S.E. 896, 898; Pinson v. Campbell, 124 Mo. App. 260, 101 S.W. 621.
Here, upon cross-examination, plaintiff Mr. Kawauchi testified without objection as to his conversations with his attorney Mr. Flynn about the deed and lease with repurchase option. He had previously given testimony on direct examination as to what had transpired between Mr. *198Flynn and-himself with respect to the letter of March 28, 1958, and the drafting thereof. As seen, it was stated in this letter that the mortgage and note was “a purely temporary arrangement” so that foreclosure could he forestalled and that “the true arrangement or agreement” was to be evidenced by a deed and lease with option to repurchase. Plaintiff Mr. Kawauchi has thus waived the privileged nature of these confidential communications.
Plaintiffs also emphasized at the argument their seventh specification of error which was:
“The trial court committed reversible error in failing to order a new trial on the newly discovered evidence of the general excise tax application, which showed that defendants had not claimed ownership until four and a half years after the transaction, and which exposed the misrepresentations of defendants and their counsel made throughout the pleadings and proceedings below.”
Newly discovered evidence is a ground for the granting of a motion for a new trial under H.R.C.P., Rulé 59, or for relief from judgment under H.R.C.P., Rule 60. In either case “the movant must have been excusably ignorant of the facts, i.e., the evidence must be such that it was not discoverable by diligent search.” 6 Moore, Federal Practice, § 59.08[3], at 3785.(2d ed. 1965). In Greenspahn v. Joseph F. Seagram & Sons, 186 F.2d 616, 619 (2d Cir. 1951), it was held that the condition of “due diligence” is not met if the “slightest investigation would have disclosed” the asserted newly discovered evidence to the movant. (Emphasis added.)
An order overruling a motion for a new trial or for relief from judgment for the introduction of newly discovered evidence will not be disturbed except for an abuse of the trial judge’s discretion. Filipino Fed. of America v. Cubico, 46 Haw. 353, 372-373, 380 P.2d 488, 499; Green*199spahn v. Joseph E. Seagram & Sons, supra.
Since the record of all applications for and licenses issued under the general excise tax are preserved and available for public inspection, it is difficult to see where “due diligence” had been exercised in this case so as to constitute an abuse of the trial judge’s discretion in overruling the motion made several years after the evidence was available to public scrutiny.
Even if the lack of “due diligence” were overlooked, it is difficult to see how the proffered evidence would have affected the ultimate result reached by the trial judge in the judgment. Filipino Fed. of America v. Cubico, supra. Nothing about the evidence could compel a contrary result or negative the trial judge’s findings of fact in support of his conclusion. Baruch v. Beech Aircraft Corp., 172 F.2d 445 (10th Cir. 1949).
As I also do not find any of the remaining errors urged on appeal to be meritorious, I would affirm the judgment entered below.

 Hewahewa v. Lalakea, 27 Haw. 544.

 It seems difficult to reconcile the designation of this sales price- of $90,000 as “a steal” with the fact that there were no bidders for the property at the public sale originally ordered at the upset price of $150,000. By the same token, the repurchase price of $117,000 was equally “a steal.”

 It should be readily apparent that the original mortgage transaction was only an expeditious manner of securing the immediate financing required to avert the foreclosure sale and this “make-shift” transaction was so recognized by all the parties.