Employees' Retirement System v. Big Island Realty, Inc.
Docket: NO. 6839
Court: Hawaii Intermediate Court of Appeals; May 4, 1981; Hawaii; State Appellate Court
In the case of Employees' Retirement System of the State of Hawaii v. Big Island Realty, Inc., the Intermediate Court of Appeals of Hawaii addressed an appeal by Big Island Realty regarding the award of a $25,000 commission to a broker in a negotiated foreclosure sale contract. The broker sought a $75,000 commission, claiming entitlement despite the contract not closing due to buyer default. The court questioned its jurisdiction to hear the appeal, determining that the broker's commission was related to the expenses of the non-sale and thus could only be appealed after the entire case was resolved, absent trial court permission.
The background involves a promissory note executed by Big Island Realty and the Osorios in favor of the Employees' Retirement System of Hawaii (ERSSH), secured by a mortgage. Big Island conveyed parts of the mortgaged property to Union Investments, which assumed the mortgage obligations. Following Union's default, ERSSH initiated foreclosure proceedings. Competing claims arose from various judgment creditors, including the State of Hawaii and the United States, alongside a cross-claim from the Osorios against Union for breach of payment obligations to ERSSH.
An interlocutory decree of foreclosure was issued, allowing Big Island and the Osorios to contest the liability on the note and the mortgage's coverage of the retained property. The court ultimately ruled that ERSSH’s mortgage covered all properties involved, including those not conveyed to Union, while reserving decisions on liability for any shortfall. A subsequent order authorized the sale of the property to a third party for $1,950,000.
The question of whether Golden Triangle Real Estate should receive a $75,000 commission was reserved initially. On December 19, 1975, the lower court approved this commission, but the corresponding sale did not close, and no record is provided regarding the $50,000 deposit. Subsequently, on November 30, 1976, the court authorized a negotiated sale of the property to Donald F. Crawshaw for $2,025,000, again approving a $75,000 commission for Golden Triangle. This sale also failed to close, leading the court on August 26, 1977, to allow the commissioner to terminate the purchase agreement and retain the $200,000 deposit as liquidated damages. The Deposit, Receipt, Offer and Acceptance (DROA) stipulated that, if the deposit was retained, the seller and Golden Triangle would split the amount, with Golden Triangle's share capped at $75,000.
Although Golden Triangle was not a party to the case, it claimed the $75,000 commission, which was contested by the Osorios, ERSSH, and Loyalty. The court, on October 6, 1977, awarded Golden Triangle a $25,000 commission, which Golden Triangle appealed without the necessary permissions under HRS. 641-1(b) or Rule 54(b) HRCP. The appeal occurred after the broker's fee issue had been resolved, but other matters in the foreclosure case remained unresolved, including the property's sale status and the claims of junior lienors.
If the case is classified as a single claim involving one plaintiff and one defendant, brokers' fees are considered part of the sale-related expenses and require full adjudication of the entire case before appeal. Conversely, if treated as a multiple claims or parties case, the court's decision on the broker's fee resolves that specific claim but leaves other claims pending, necessitating certification for appeal. The only potential exception to these rules is the collateral order doctrine, which allows for immediate appeal of issues that are separate and significant enough to warrant review before the case is fully resolved.
Hawaii opposes the expansion of the collateral order doctrine, as noted in legal references and case law. Under Hawaii Revised Statutes (HRS) 641-1(b) and Hawaii Rules of Civil Procedure (HRCP) Rule 73(a), trial courts can decide on the appealability of certain orders. The court suggests limiting the collateral order doctrine to exceptional cases and expresses disfavor towards case law that contradicts established procedural rules, particularly when it restricts trial judges' control over case progression. Although there are precedents regarding interlocutory appeals in Hawaii, caution is advised against relying heavily on older cases predating the current form of HRCP Rule 54(b). The court assesses whether an order awarding a $25,000 broker's fee qualifies as a collateral order, concluding it does not. The failure of a sale to close does not render the broker's fee claim sufficiently separate from the foreclosure decree to classify it as a collateral order eligible for appeal without permission. As a result, the appeal was dismissed for lack of jurisdiction, as the order did not meet the finality requirement under HRS 641-1(a). The court also noted uncertainties regarding the broker's representation and clarified the classification of Golden Triangle as an intervenor rather than an interpleader, choosing not to impose sanctions for procedural failure.
A judgment, order, or decree that does not fully resolve an entire claim may be appealed with the trial court's permission, pursuant to HRS. 641-1(b) (1976). The court in this case refrains from deciding whether this issue is applicable. The collateral order doctrine is relevant to both single claim cases involving one plaintiff and one defendant, as well as to cases with multiple claims or parties. Relevant case law includes Chuck v. St. Paul Fire and Marine Insurance, Co., Cleveland v. Cleveland, and several others, establishing precedents for the application of this doctrine in Hawaii.
