Provident Funding Associates, L.P. v. Gardner. ( 2021 )

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
16-JUN-2021
08:08 AM
Dkt. 19 OP
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
---o0o---
PROVIDENT FUNDING ASSOCIATES, L.P.,
Respondent/Plaintiff-Appellee,
vs.
GISELE M. L. GARDNER, Petitioner/Defendant/Cross-Claim
Plaintiff/Cross-Claim Defendant-Appellant,
and
CITIBANK (SOUTH DAKOTA) N.A., Respondent/Defendant-Appellee,
and
TRAVIS WITTMEYER; KANOA BRISTOL; BLUE WAVE
INVESTMENT SOLUTIONS, LLC, Respondents/Defendants/
Cross-Claim Defendants/Cross-Claim Plaintiffs-Appellees.
SCWC-XX-XXXXXXX
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CIV. NO. 1CC151002313)
JUNE 16, 2021
RECKTENWALD, C.J., NAKAYAMA, McKENNA, WILSON, AND EDDINS, JJ.
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OPINION OF THE COURT BY RECKTENWALD, C.J.
I. INTRODUCTION
This case requires us to consider the binding effect
of a stipulation. The parties to this foreclosure, after
summary judgment was entered in favor of the note holder but
before sale, entered into a stipulation in which they agreed to
postpone the foreclosure auction while they worked to pursue a
private sale. No private sale came to pass, and the property
sold at auction for less than the parties had hoped a private
sale would yield. They now dispute the effect the stipulation
should have had on the circuit court proceedings.
We hold that a stipulation made during the course of
litigation – reduced to writing, agreed to by all parties, and
filed with the court – operates in many respects like a contract
and generally binds the parties to its terms. The Circuit Court
of the First Circuit (circuit court) and Intermediate Court of
Appeals (ICA) therefore erred by failing to treat the
stipulation at issue as a binding agreement.
II. BACKGROUND
A. Circuit Court Proceedings
1. Dispute and Foreclosure Proceedings
This foreclosure case concerns a property in Waialua.
In 2015, Provident Funding Associates, L.P., the note holder,
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brought a complaint for foreclosure in the circuit court 1 against
(as relevant to this appeal) Travis Wittmeyer, Kanoa Bristol,
and Blue Wave Investment Solutions, LLC (collectively, the Blue
Wave defendants), and Gisele Gardner, the record titleholder of
the property and the debtor. Gardner and the Blue Wave
defendants are also parties to another lawsuit (Gardner
lawsuit). 2 It is by virtue of the Gardner lawsuit that Provident
Funding named the Blue Wave defendants in the complaint as
possible junior interest holders.
After summary judgment was granted to Provident
Funding but before any foreclosure sale, Gardner found a buyer
who was willing to purchase the property for $700,000 (a price
that would satisfy the debt in full) and entered into a contract
with that buyer on April 29, 2016 (April 29, 2016 transaction).
However, the Blue Wave defendants thought the property was
considerably more valuable and hoped to find a private buyer who
1 The Honorable Bert I. Ayabe presided until January 2017. The
Honorable Jeannette H. Castagnetti presided thereafter.
2 According to the parties’ representations in the record of this
case (which we offer here solely for context and do not make any suggestion
as to their accuracy), the Gardner lawsuit, which is currently pending in the
circuit court, Gardner v. Wittmeyer, Civil No. 15-1-0920-05, relates to the
same property. In 2009, Gardner contracted with the Blue Wave defendants to
convey the property. Something went wrong in the conveyance (the parties
dispute who was at fault), but the Blue Wave defendants nonetheless took
possession of the property, paid what was then due to the bank, and continued
to make monthly mortgage payments until October 2014. At that point, the
monthly mortgage payments stopped, although the parties dispute the reason.
The mortgage went into default, giving rise to the instant foreclosure
action. Meanwhile, Gardner sued the Blue Wave defendants for, among other
things, breach of contract in the Gardner lawsuit, and the Blue Wave
defendants filed a counter-claim against Gardner.
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would pay more than $700,000.
2. The Stipulation
On September 16, 2016, the parties entered into the
First Stipulation to Continue Foreclosure Sale and Order
(Stipulation). The Stipulation provided that the foreclosure
sale would be continued to October 25, 2016 while the defendants
pursued a private sale. Pursuant to the Stipulation, Gardner
and the Blue Wave defendants agreed to try to sell the property
to a third-party buyer, but if no other buyer could be found,
they agreed to close the April 29, 2016 transaction. In the
event neither the April 29, 2016 transaction nor a sale to a
different third-party buyer closed by October 25, 2016,
Provident Funding would proceed to a foreclosure sale.
Specifically, the Stipulation provided in relevant
part:
2. Gardner, Wittmeyer, Bristol and Blue Wave will
cooperate in a good faith effort to sell the property for
an amount that will result in a full payoff of the loan
owed to Provident Funding (“private sale”) and provide
Provident Funding with a copy of all fully executed
purchase contract(s) within 2 business days of execution
for Provident Funding’s review and approval;
3. If there is no active purchase contract for the
private sale of the property pending as of September 23,
2016 or if a private sale is not closed on or before
October 18, 2016 at 5:00pm, Gardner, Wittmeyer, Bristol and
Blue Wave agree to proceed in good faith with the
transaction presented to Provident Funding by Gardner with
a purchase contract reference date of April 29, 2016
(“April 29, 2016 transaction”) and cooperate to close the
April 29, 2016 transaction promptly to the extent that the
Buyer is willing and able to proceed with the transaction
and Provident Funding approves the sale;
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4. Gardner, Wittmeyer, Bristol and Blue Wave agree
that the Court’s Findings of Fact, Conclusions of Law and
Order Granting Provident Funding’s Motion for Summary
Judgment and Decree of Foreclosure, filed on July 28, 2016,
shall remain in effect and the Commissioner shall proceed
with the preparations for the foreclosure sale to be
scheduled for a date on or about October 25, 2016, and the
foreclosure sale itself, unless and until the closing of a
private sale or the April 29, 2016 transaction resulting in
the full payoff of Provident Funding. The Parties agree
that the foreclosure sale may proceed at 12:00pm (noon) on
October 25, 2016, or anytime thereafter as scheduled by the
Commissioner, if neither a private sale nor the April 29,
2016 transaction has closed prior to October 25, 2016 at
12:00pm.
(Emphases added.)
Further, the Stipulation provided that “[i]f a private
sale or the April 29, 2016 transaction is consummated, Provident
Funding will be paid in full from the sale proceeds,” Provident
Funding will be dismissed from the litigation, and “[t]he
disposition of any excess proceeds will be for the remaining
parties and the Court to determine/decide.” All defendants
stipulated “that they will not seek to make Provident Funding a
party to or otherwise involve Provident Funding in” the Gardner
lawsuit. The parties also agreed that “[i]f the sales proceeds
are insufficient to pay the debt owed to Provident Funding in
full, the case shall proceed without prejudice to Provident
Funding’s right to obtain a deficiency judgment and other
appropriate relief.” 3
3 The Stipulation also provided that, with respect to the
property’s tenants, “[a]ll net rental income collected by the Commissioner
until the sale of the property is completed will be applied to the
outstanding amount owed to Provident Funding.” Gardner agreed to “assume any
tax liability associated with the Commissioner’s collection of rent” while
(continued . . .)
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The Stipulation was filed with the court, which signed
the Stipulation “approved and so ordered.” (Capitalization
altered.)
3. The Motion to Compel
On November 23, 2016, 4 Gardner filed a “Motion to
Compel and for Sanctions” (Motion). She represented that the
Blue Wave defendants had “block[ed]” the April 29, 2016
transaction in contravention of the Stipulation. Thus, Gardner
moved the court to compel the Blue Wave defendants to, among
other things, take all necessary steps to transfer the real
property to the April 29, 2016 transaction buyer, and asked for
sanctions against the Blue Wave defendants.
Gardner presented the following version of events. 5
She claimed that she notified the Blue Wave defendants of the
April 29, 2016 buyer in May 2016 - a transaction of which
the Blue Wave defendants agreed to “promptly pay the arrearages owed to the
utility company, turnover all leases, keys and security deposits to the
Commissioner and cooperate in good faith with the Commissioner’s further
requests[.]” The Blue Wave defendants also agreed “to take
full[ ]responsibility for any claims made by the tenants for unreimbursed
security deposits.” If a private sale, the April 29, 2016 transaction, or a
foreclosure sale did not result in sufficient funds to “satisfy the claims of
the tenants,” the defendants agreed to “promptly pay into Court all amounts
claimed by the tenants to be owed by the landlord[.]”
4 While the Stipulation allowed the foreclosure sale to proceed on
October 25, 2016, Gardner represented that “[o]n October 24, 2016, the
foreclosure sale was continued until November 29, 2016 to provide additional
time for the [p]arties to close the April 29, 2016 transaction or a second
transaction[.]”
5 We provide the parties’ representations about what occurred after
the Stipulation only for background and make no suggestion about the accuracy
of their factual claims.
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Provident Funding approved - and requested “access and
cooperation to sell the [m]ortgaged [p]roperty,” which the Blue
Wave defendants refused. After the parties entered into the
Stipulation, “on or about October 12, 2016, a Purchase
Contract . . . was fully executed between Gardner, the [Blue
Wave] [d]efendants, and Brian Rose,” wherein Rose, a buyer found
by the Blue Wave defendants, agreed to purchase the property for
$789,000 ($89,000 more than the April 29, 2016 transaction sale
price) (Rose contract). However, Provident Funding refused to
allow additional time to close the Rose contract, and instead,
“in consequence of [the Blue Wave defendants’] lack of
cooperation regarding rent, failure to pay outstanding utility
bills, and the failure to open an escrow by the October 18, 2016
deadline, the Parties[’] obligation to close the April 29, 2016
transaction . . . was triggered.” Thus, Provident Funding -
over objection by the Blue Wave defendants - asked for the
foreclosure sale to be continued for thirty days in order for
the April 29, 2016 transaction to close.
Between October 20, 2016 and October 26, 2016, the
Blue Wave defendants asked several times to postpone the
foreclosure sale in order to close the Rose contract. Provident
Funding refused, taking the position that at that point,
Paragraph 3 of the Stipulation required the parties to cooperate
in closing the April 29, 2016 transaction; they nonetheless
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“stated their willingness to accept the Rose [c]ontract if it
closed prior to the April 29, 2016 transaction[.]” Upon
requests by Provident Funding and Gardner for “tangible proof of
progress” on the Rose contract, the Blue Wave defendants
represented on November 2, 2016 that Rose would not proceed
unless given forty-five days to close. On November 17, 2016,
Gardner “explained that closing the April 29, 2016 transaction
required the [Blue Wave] [d]efendants[’] cooperation,” to which
the Blue Wave defendants replied that the foreclosure auction
date should not be extended because Rose intended to bid
$750,000 at auction. From these exchanges (which occurred via
email, of which copies were attached to the motion as exhibits),
Gardner concluded that “the [Blue Wave defendants’] failure to
respond and the tenor of the email suggests that no cooperation
is forthcoming.” She further represented that the April 29,
2016 buyer remained ready, willing, and able to close.
Accordingly, she sought a court order compelling the Blue Wave
defendants to proceed with the April 29, 2016 transaction, in
addition to sanctions against them.
4. Provident Funding’s Position Statement
Provident Funding submitted a “Position Statement”
regarding the Motion on November 23, 2016. In it, Provident
Funding represented that they intended to proceed with the
November 29, 2016 foreclosure but remained willing to accept the
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proceeds from the April 29, 2016 transaction “in satisfaction of
the debt” so long as those proceeds were tendered no later than
December 14, 2016. It was Provident Funding’s position that
“[p]er Paragraph 3” of the Stipulation, “under the present
circumstances,” the Blue Wave defendants agreed to “proceed in
good faith with” the April 29, 2016 transaction. Provident
Funding noted that if the foreclosure action were not dismissed,
as agreed in the Stipulation, “due to the lack of cooperation by
the [Blue Wave defendants],” Gardner should “bear the expense of
moving the court for an order dismissing the case and . . . the
[Blue Wave defendants] should be ordered to reimburse Provident
Funding” for any costs incurred by Provident Funding “as a
result of their failure to honor their obligations under the
Stipulation.”
5. The Blue Wave Defendants’ Memorandum in Opposition
In their memorandum in opposition (filed after the
foreclosure auction proceeded on November 29, 2016, and the
property was sold to Provident Funding for $447,040), the Blue
Wave defendants characterized the post-Stipulation events as
follows. They alleged that they received the $789,000 offer
that became the Rose contract in late September. On
September 29, 2016, the Rose contract “was signed by Mr. Rose as
Buyer and Blue Wave and Gardner as Sellers.” The next day,
“Blue Wave and Gardner signed an Exclusive Right-To-Sell Listing
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Contract” authorizing a particular realtor “to sell or exchange”
the property. In early October, the Blue Wave defendants
communicated to Provident Funding that Rose was waiting to
proceed on the sale pending their approval; on October 12,
Provident Funding told the parties that it “would approve of the
Rose [c]ontract, but subject to maintaining the right, under the
First Stipulation, to move forward with the foreclosure[] sale
on October 25, 2016 at noon if the Rose [c]ontract ha[d] not
closed before then.” The Blue Wave defendants replied that Rose
needed more time to close. They attempted to find out from Rose
how much time he needed, at which point the Blue Wave defendants
learned that “the Rose [c]ontract could not move forward until
the other escrow” associated with the April 29, 2016 transaction
closed. They asked Gardner to close the other escrow, but
“Gardner’s counsel refused[.]”
After communicating “the escrow situation” to the
parties, “[o]n October 19, 2016, Provident’s counsel, citing the
terms of the First Stipulation, said that Provident would not
give the Rose [c]ontract additional time to close and that
Provident expected the parties to proceed to close the
[April 29, 2016 transaction].” Provident Funding denied a
request by both defendants for a 30-day extension to close the
Rose contract, but two days later asked the Commissioner to
continue the foreclosure for thirty days for the April 29, 2016
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transaction to close. The Blue Wave defendants objected,
arguing that Provident Funding should have allowed “a reasonable
extension” for the Rose contract to close if they were willing
to do so for the April 29, 2016 transaction. By October 26,
2016, Rose had made it clear to the Blue Wave defendants he
wanted to proceed but could not close unless given forty-five
days; he also represented to the Blue Wave defendants that at
auction, “he would likely bid at least $750[,000] for the
Property.” On October 26, 2016, the Blue Wave defendants asked
for an extension to allow the Rose contract to close, which
Provident Funding denied two days later. The Blue Wave
defendants reiterated that Rose needed “assurance that he would
be given a reasonable time (45 days) to close” on November 2,
2016. On November 17, 2016, “Blue Wave’s counsel sent to the
parties an email objecting to any further extension of the
foreclosure auction for the purpose of closing the [April 29,
2016 transaction].”
The Blue Wave defendants argued that in fact,
Provident Funding and Gardner “did not comply with the terms of
the First Stipulation, and it is unreasonable for Gardner to now
claim that the Blue Wave [d]efendants are not complying with
such First Stipulation,” and that they did not act in bad faith.
Gardner and Provident Funding did not “cooperate[ ] in good
faith with the Rose [c]ontract,” and “[i]t is unreasonable for
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Gardner to refuse to cooperate in good faith with the Rose
[c]ontract, and then claim that the Blue Wave [d]efendants are
not cooperating with the [April 29, 2016 transaction].”
After a hearing, the court orally denied the Motion:
Okay. Okay. Well, this is a foreclosure court, and
normally unless all the parties agree to a private sale, we
normally agree to proceed with the foreclosure sale. And
but the court after the confirmation still has the -- still
takes a look to see whether or not the price obtained at
any confirmation is fair and reasonable so that’s something
that would be left for the court to determine at a later
date.
So with that, you know, it doesn’t seem like the
parties have any agreement for private sale here. The
court will be denying this motion here today, and the court
asks [the Blue Wave defendants’ counsel] to prepare the
order for that.
(Emphasis added.)
6. Confirmation of Sale
Provident Funding moved to confirm the sale
thereafter. At the hearing on the motion to confirm sale,
bidding was reopened, which resulted in a high bid of $635,000
from Rose. But Gardner, against whom deficiency was to be
entered, nonetheless asked the court to:
exercise your discretion. And to the extent that [ ]
requires you to set th[e circuit court’s earlier order
denying the motion to compel and for sanctions] aside, I
would, because the equities here, the fairness, is that my
client is being subjected to this deficiency judgment. It
wasn’t her fault. She had an agreement by the Court and by
all the parties, and she complied with that. And it would
have resulted in zero deficiency. And it’s not because my
client did anything to stop that stipulation from going
forward. And I think, as [Provident Funding] pointed out
in [its] brief, it’s because the [Blue Wave defendants]
refused to adhere to that stipulation.
The court granted Provident Funding’s motion,
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confirming the $635,000 sale to Rose, and declined Gardner’s
request to set aside the deficiency judgment “or any portion of
[the court’s] order denying the motion to compel.” It noted
that the dispute between Gardner and the Blue Wave defendants
should be pursued elsewhere and that “nothing . . . would
preclude you from seeking whatever damages you believe you[]
would be entitled to[.]”
B. ICA Proceedings
Gardner appealed, challenging (1) the circuit court’s
conclusion that there was no agreement for a private sale, (2)
the circuit court’s conclusion that the Stipulation was not
enforceable and that the Blue Wave defendants had not breached
it, and (3) the circuit court’s denial of the Motion. 6
The ICA affirmed the circuit court in a Summary
Disposition Order (SDO). It first held that “[t]he Circuit
Court’s finding [that] there was no agreement for a private sale
was not clearly erroneous.” It explained that the Stipulation
must be interpreted using “contract law principles,” and “[t]o
6 Before the Blue Wave defendants filed their answering brief at
the ICA, Gardner filed a motion for partial dismissal and a stipulation
between herself and Provident Funding, which asserted that none of the issues
on appeal pertained to Provident Funding and that both parties agreed for
Provident Funding to be dismissed. The Blue Wave defendants opposed
dismissing Provident Funding, as they alleged they were neither informed that
a dismissal was being pursued nor told of the terms of the stipulated
dismissal, and that partial dismissals were not contemplated by the Hawaiʻi
Rules of Appellate Procedure. The ICA granted the motion to dismiss, and
Provident Funding was not involved in the appeal thereafter. The dismissal
of Provident Funding is not at issue before this court.
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be enforceable, a contract must be certain and definite as to
its essential terms.” (Quoting Boteilho v. Boteilho, 58 Haw.
40, 42, 564 P.2d 144, 146 (1977).) While “[t]he intent of the
parties is a question of fact,” whether the contract is
ambiguous is a question of law, and “[a]mbiguity in the terms of
the document raises questions regarding the parties’ intent to
agree.” (Citing Found Int’l Inc. v. E.T. Ige Constr., Inc., 102
Hawaiʻi 487, 497, 78 P.3d 23, 33 (2003); 1 Corbin, Contracts
§ 4.10 (2019).)
The ICA found ambiguity in the word “cooperate” as
used in the Stipulation: “The word cooperate has two
definitions; one definition requires collaboration, while
another requires compliance with another’s directives.”
(Citation omitted.) Because of this ambiguity, the ICA turned
to parol evidence in order to “explain the circumstances
surrounding the execution of the contract[.]” (Quoting Hokama
v. Relinc Corp., 57 Haw. 470, 474, 559 P.2d 279, 282 (1977).)
Applying the rule, the ICA described what the parties
represented on the record after entering into the Stipulation:
At the December 20, 2016 hearing,[ 7] the three parties’
counsel provided argument regarding the intent behind the
Stipulation. Gardner’s counsel argued the Stipulation
arose after attempts to settle the related civil case,
pointing to a hearing where “it was strongly pointed out
that a joint sale would be a way to resolve this.” [The
Blue Wave defendants’] counsel told the court that his
clients “continued to propose to proceed on a mutual basis
7 This hearing pertained to Gardner’s Motion and occurred nearly
three months after the Stipulation was entered.
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with a mutually acceptable realtor” to accomplish such a
sale. Provident’s attorney maintained that the Stipulation
was drafted by Provident’s counsel to provide the bank with
some assurance that the parties would work to settle their
“dysfunction” as an alternative to the foreclosure sale but
gave them a deadline so the bank “would not be waiting
indefinitely.”
(Alterations omitted.)
Accordingly, “[t]he parties argue on appeal that the
Stipulation was meant to be a stipulation[,] but each cite
different purposes.” The ICA concluded that the Stipulation
“lacked written terms” stating the essential elements of a
settlement agreement, so it could not be construed as such.
Likewise, “[t]he Circuit Court . . . considered and rejected the
notion that the parties had an agreement for sale of land,” and
consistent with that conclusion, the Stipulation also lacked the
essential terms for a contract of that type (for instance,
“identification of the parties, a description of the property
sold, the price, [and] the time and manner of payment”).
(Quoting In re Application of Sing Chong Co., Ltd., 1 Haw. App.
236, 239, 617 P.2d 578, 581 (1980).)
The ICA reasoned that “[a]n agreement that leaves an
essential element ‘to be settled by further negotiation . . . is
merely an agreement to agree and is not a valid and binding
contract.’” (Quoting Carson v. Saito, 53 Haw. 178, 181, 489
P.2d 636, 638 (1971).) “Given the essential terms the parties
had left to work out regarding the sale of the property, the
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Circuit Court was not clearly erroneous in finding lack of
agreement on the sale. . . . Where agreement cannot be
ascertained from terms in the agreement or implied in law, there
is no binding contract.” In light of this conclusion, the ICA
did not consider whether the Blue Wave defendants breached the
Stipulation.
Finally, the ICA determined that the circuit court did
not abuse its discretion by denying Gardner’s motion for
sanctions. The ICA construed Gardner’s brief as alleging “that
[the Blue Wave defendants] and attorneys should be sanctioned
for their representation[] that a ‘potential buyer’ would bid
(1) over $700,000 at auction and (2) at least $750,000 at
auction, bids that ultimately failed to materialize.” Because
those bidders were under no obligation to bid and indeed, the
prospect of higher bids “helped Gardner because they were the
basis for re-opening the public sale,” such representations did
not constitute a basis for sanctions.
C. Supreme Court Proceedings
Gardner presents three questions in her application
for certiorari: (1) whether the ICA erred by affirming the
circuit court’s conclusions that the parties had no agreement
for a private sale, (2) whether the ICA erred by “fail[ing] to
consider whether [the Blue Wave defendants] breached the
Stipulation,” and (3) whether the ICA erred by concluding the
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circuit court “did not abuse its discretion regarding Gardner’s
motion for sanctions.” Gardner’s application asks, among other
things: “If parties and their attorneys can now argue that
stipulations entered in the court’s record and approved by the
court are not enforceable because the terms are not deemed to be
a contract, then what value is a stipulation?”
III. STANDARDS OF REVIEW
A. Interpretation of a Stipulation
A stipulation is reviewed using contract law
principles. See Restatement (Second) of Contracts § 94 (2020).
“The construction and legal effect to be given a contract is a
question of law freely reviewable by an appellate court.”
Balogh v. Balogh, 134 Hawaiʻi 29, 37, 332 P.3d 631, 639 (2014)
(citation, quotation marks, and brackets omitted); Found. Int’l,
102 Hawaiʻi at 497, 78 P.3d at 33 (“In the absence of any
ambiguity, a question of construction arising upon the face of
the instrument is for the court to decide.” (citation omitted)).
B. Denial of Sanctions
The decision to impose sanctions is within a circuit
court’s discretion. Fujimoto v. Au, 95 Hawaiʻi 116, 137, 19 P.3d
699, 720 (2001). A court abuses its discretion if it “clearly
exceeded the bounds of reason or disregarded rules or principles
of law or practice to the substantial detriment of a party
litigant.” OneWest Bank, F.S.B. v. Ass’n of Owners of Kumulani
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at Uplands at Mauna Kea, 146 Hawaiʻi 105, 111, 456 P.3d 178, 184
(2020) (citation omitted).
IV. DISCUSSION
The circuit court’s denial of sanctions 8 seemed to be
based on its determination that the parties did not “have any
agreement for private sale.” The ICA likewise determined that
there was “no binding contract” in this case. Of course,
sanctions cannot be imposed for violating an agreement that does
not exist. But the Stipulation was indeed a binding agreement,
albeit not one for private sale, that should have been given due
effect.
“Any matter that involves the individual rights or
obligations among the parties in an action or proceeding in
court may properly be made the subject of a stipulation between
them[.]” 83 C.J.S. Stipulations § 24 (2020). Parties have
leeway to bind themselves in a stipulation, and such agreements
8 Before filing her Opening Brief, Gardner moved first to stay the
judgment of the circuit court confirming sale. The ICA denied the motion,
explaining that Gardner was required to first file a motion for a stay in the
circuit court or otherwise explain why doing so would be “impracticable”
pursuant to Hawaiʻi Rules of Appellate Procedure Rule 8. Thus, the
foreclosure sale has long since happened and was not stayed, and the
confirmation of the sale is not at issue. In light of this backdrop, to the
extent that Gardner challenges the circuit court’s denial of her request to
compel the Blue Wave defendants to transfer the property to the buyer
involved in the April 29, 2016 transaction, that issue is moot. We agree
with the Blue Wave defendants that, as they asserted in their response
opposing Gardner’s application for writ of certiorari, “the only matter
remaining before [this court] is the ICA’s decision affirming the Circuit
Court’s Order Denying Sanctions.”
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will be broadly enforced:
Parties by their stipulations may in many ways make the law
for any legal proceeding to which they are parties, which
not only binds them, but which the courts are bound to
enforce. They may stipulate away statutory, and even
constitutional rights. They may stipulate for shorter
limitations of time for bringing actions for the breach of
contracts than are prescribed by the statutes, such
limitations being frequently found in insurance policies.
They may stipulate that the decision of a court shall be
final, and thus waive the right of appeal; and all such
stipulations not unreasonable, not against good morals or
sound public policy, have been and will be enforced; and,
generally, all stipulations made by parties for the
government of their conduct or the control of their rights
in the trial of a cause or the conduct of a litigation are
enforced by the courts.
Okuhara v. Broida, 51 Haw. 253, 256–57, 456 P.2d 228, 230–31
(1969) (citation omitted) (emphases added).
In short, then, “parties ordinarily are bound by the
terms of their stipulations[.]” Gakiya v. Hallmark Props.,
Inc., 68 Haw. 550, 555, 722 P.2d 460, 464 (1986); Yoneji v.
Yoneji, 137 Hawaiʻi 299, 315, 370 P.3d 704, 720 (App. 2016) (“A
trial court is bound to follow the procedures set forth in a
stipulation, unless there was a finding of manifest
injustice.”); see also Moore v. Richard W. Farms, Inc., 437
S.E.2d 529, 531 (N.C. Ct. App. 1993) (“Once a stipulation is
made, a party is bound by it[.]”); Nishman v. De Marco, 76
A.D.2d 360, 368 (N.Y. App. Div. 1980) (“The judicial policy in
favor of the enforcement of stipulations . . . has found
widespread application.”).
Stipulations are interpreted by applying principles of
contract law. 73 Am. Jur. 2d Stipulations § 6 (2020) (“The
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rules of contract interpretation apply to stipulations.”); see
Burlington Ditch Reservoir & Land Co. v. Metro Wastewater
Reclamation Dist., 256 P.3d 645, 676 (Colo. 2011) (“Stipulations
are contracts, binding upon their signatory parties, and
interpreted under contract law principles.”); Czumak v. N.H.
Div. of Developmental Servs., 923 A.2d 208, 213 (N.H. 2007) (“A
stipulated agreement is contractual in nature and, therefore, is
governed by contract rules.”); Nishman, 76 A.D.2d at 366 (“A
stipulation is a contract between parties, and as such is
governed by general principles for its interpretation and
effect[.]”). Unlike contracts, however, they generally need not
be supported by consideration to be enforceable. Lillard Pipe &
Supply, Inc. v. Bailey, 387 P.2d 118, 122 (Okla. 1963)
(“Although stipulations are unlike ordinary contracts in that no
consideration or mutuality is required, they are to be construed
like other contracts between parties.”); 73 Am. Jur. 2d
Stipulations § 1 (2020) (“While a stipulation has been described
as a contract, some of their incidents do not inhere in ordinary
contracts. Thus, for example, no consideration is necessary to
the validity of a stipulation, and no mutuality is required.”
(footnotes omitted)).
The ICA determined that the “lack of essential terms”
in the Stipulation to create either a settlement agreement or a
contract for the sale of land rendered it so uncertain as to be
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unenforceable. While it is true that a contract indeed may fail
for lack of definiteness, such a construction is disfavored, and
the Stipulation here survives that inquiry. “To be enforceable,
a contract must be certain and definite as to its essential
terms.” Boteilho, 58 Haw. at 42, 564 P.2d at 146; see also
Honolulu Waterfront Ltd. P’ship v. Aloha Tower Dev. Corp., 692
F. Supp. 1230, 1236 (D. Haw. 1988) (recognizing that under
Hawaiʻi law, contracts may be too indefinite to be enforceable)
(citing Sing Chong, 1 Haw. App. at 239, 617 P.2d at 581). “The
terms of a contract are reasonably certain if they provide a
basis for determining the existence of a breach and for giving
an appropriate remedy.” Almeida v. Almeida, 4 Haw. App. 513,
519, 669 P.2d 174, 179 (App. 1983) (quoting Restatement (Second)
of Contracts § 33 (1981)). However, “the law leans against the
destruction of contracts for uncertainty. Courts favor the
determination that an agreement is sufficiently definite. We
will, if possible, so construe the agreement so as to carry into
effect the intention of the parties.” Sing Chong, 1 Haw. App.
at 239, 617 P.2d at 581 (citation omitted); see also Hi-Pac,
Ltd. v. Avoset Corp., 26 F. Supp. 2d 1230, 1235 (D. Haw. 1997).
The ICA misapplied this doctrine when it attempted to
map the essential terms of a settlement agreement or of a
contract for sale of land onto the Stipulation. That the
Stipulation is neither does not end the inquiry. Instead, the
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ICA should have avoided “the destruction of contracts for
uncertainty” and “construe[d] the agreement [so] as to carry
into effect the intention of the parties” as embodied by the
agreement if possible. Sing Chong, 1 Haw. App. at 239, 617 P.2d
at 581.
Here, an enforceable construction of the Stipulation
is possible. The Stipulation bound the parties to use good
faith efforts to either close a private sale or close the
April 29, 2016 transaction by the agreed-upon deadline. Per
Paragraph 3 of the Stipulation, “If there is no active purchase
contract for the private sale of the property pending as of
September 23, 2016, or if a private sale is not closed on or
before October 18, 2016,” the parties “agree[d] to proceed in
good faith” and to “cooperate to close the April 29, 2016
transaction.” Thus, the Stipulation provided, as relevant here,
the following terms: (1) All defendants would “cooperate in a
good faith effort to sell the property” to a third-party buyer;
(2) If no private sale closed before October 18, 2016, the
parties would “proceed in good faith with” and “cooperate to
close the April 29, 2016 transaction”; (3) During this period,
Provident Funding would not seek a foreclosure sale; and (4) If
neither a third-party contract nor the April 29, 2016
transaction closed, a foreclosure sale would proceed. These
terms are sufficiently definite because they “provide a basis
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for determining the existence of a breach and for giving an
appropriate remedy.” Restatement (Second) of Contracts § 33
(1981). Gardner or the Blue Wave defendants would have breached
if either one failed to “cooperate in a good faith effort” to
find a third-party buyer or, in the event no private sale closed
by October 18, 2016, if either one failed to “cooperate to
close” the April 29, 2016 transaction.
Even if there were some ambiguity in the Stipulation,
we disagree with the ICA that an ambiguity in a contractual term
casts doubt on whether the parties intended to be bound at all.
To the contrary, in the face of an ambiguity, “[t]he court’s
objective is to ascertain and effectuate the intention of the
parties as manifested by the contract in its entirety.”
Hawaiian Ass’n of Seventh-Day Adventists v. Wong, 130 Hawaiʻi 36,
45, 305 P.3d 452, 461 (2013) (quotation marks and citation
omitted) (emphasis added). Indeed, although the parties later
in the proceedings offered different perspectives on why they
entered into the Stipulation, the purposes presented by the
parties – while relevant to resolving ambiguity – are irrelevant
to the objective inquiry over whether the parties intended to be
bound at all. Earl M. Jorgensen Co. v. Mark Constr., Inc., 56
Haw. 466, 470, 540 P.2d 978, 982 (1975) (“The existence of
mutual assent or intent to accept is determined by an objective
standard.”). That test is whether the parties’ “words or acts
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. . . under a standard of reasonableness . . . manifested an
objective intention to agree.” Id. Even if the parties had
argued that they did not enter the Stipulation with the intent
to form a binding agreement, 9 the fact that they signed the
Stipulation and filed it with the court leaves a reasonable
observer no doubt that the parties mutually assented to be bound
by the Stipulation’s terms.
We therefore must look to the instrument itself to
discern whether its terms are clear, and although our goal is to
effectuate the parties’ intent, we must glean that intent from
the Stipulation itself. 83 C.J.S. Stipulations § 46 (2020)
(“The primary rule is that the court must, if possible,
ascertain and give effect to the intent of the parties. . . .
An appellate court analyzes the language of a stipulation to
determine the parties’ intentions and ends its inquiry if the
language is clear.” (footnotes omitted)). “It is well settled
that courts should not draw inferences from a contract regarding
the parties’ intent when the contract is definite and
unambiguous.” State Farm Fire & Cas. Co. v. Pac. Rent-All,
Inc., 90 Hawaiʻi 315, 324, 978 P.2d 753, 762 (1999) (citing
Hanagami v. China Airlines, Ltd., 67 Haw. 357, 364, 688 P.2d
9 No party argued as much, and indeed, the Blue Wave defendants’
memorandum in opposition to the Motion and their answering brief at the ICA
claimed that it was Gardner and Provident Funding who breached – an argument
predicated on the Stipulation being binding.
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1139, 1144 (1984)). While the parties disagreed ex post about
the Stipulation’s meaning and effect, this disagreement “does
not render clear language ambiguous.” State Farm, 90 Hawaiʻi at
324, 978 P.2d at 762. Instead, “[a]s a general rule, the court
will look no further than the four corners of the contract to
determine whether an ambiguity exists.” Hawaiian Ass’n of
Seventh-Day Adventists, 130 Hawaiʻi at 45, 305 P.3d at 461.
We disagree with the ICA that the Stipulation is
ambiguous. “Contract terms are interpreted according to their
plain, ordinary, and accepted sense in common speech.” Id. “A
contract is ambiguous when its terms are reasonably susceptible
to more than one meaning.” Id. The ICA found ambiguity in the
term “cooperate,” which it concluded could be reasonably
construed to either require “collaboration” or “compliance with
another’s directives.” To “cooperate” means “to act or work
with another or others.” Cooperate, Merriam-Webster.com
Dictionary, 275 (11th ed. 2009), https://perma.cc/X9BJ-ZUJR.
The other dictionary cited by the ICA, Macmillan, likewise
defines cooperate as: “to work with other people to achieve a
result that is good for everyone involved.” Cooperate,
Macmillan Dictionary Online, https://perma.cc/5UXP-SP3S.
Black’s Law Dictionary similarly defines “cooperation agreement”
as “any contract by which the parties bind themselves to work
jointly towards some mutually beneficial ends.” Cooperation
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agreement, Black’s Law Dictionary (11th ed. 2019) (emphasis
added). In essence, then, to cooperate means to work together.
The second definition in Macmillan does pertain to, as
the ICA put it, “compliance with another’s directives”: “to do
what someone asks you to do, especially by providing them with
information.” Macmillan Dictionary Online,
https://perma.cc/5UXP-SP3S. However, this definition does not
fit within the context of the Stipulation, which requires the
parties to cooperate - implicitly, with each other. See Found.
Int’l, 102 Hawaiʻi at 496–97, 78 P.3d at 32–33 (“[T]he test [of
ambiguity] lies not necessarily in the presence of particular
ambiguous words or phrases but rather in the purport of the
document itself, whether or not particular words or phrases in
themselves be uncertain or doubtful in meaning.” (emphasis
added)); Cherokee Metro. Dist. v. Upper Black Squirrel Creek
Designated Ground Water Mgmt. Dist., 247 P.3d 567, 573 (Colo.
2011) (“To determine whether there is ambiguity [in a
stipulation], courts must examine the instrument’s language and
construe it in harmony with the plain and generally accepted
meaning of the words employed.”). The Stipulation does not
require the Blue Wave defendants to cooperate with Gardner (or
vice versa), nor does it contemplate who would be giving the
directives if that were what “cooperate” meant. Thus, the term
“cooperate” as used in the agreement is not “reasonably
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susceptible” to the ICA’s other suggested definition. Hawaiian
Ass’n of Seventh-Day Adventists, 130 Hawaiʻi at 45, 305 P.3d at
461.
Accordingly, the commonly-understood meaning of
cooperate - to work together - applies, and we need not look
beyond the Stipulation itself because the intentions of the
parties are clear from the instrument. When the Stipulation
required the parties to “cooperate to close the April 29, 2016
transaction,” it bound the parties to work together to close the
April 29, 2016 transaction once that provision was triggered
(which would occur if no private sale closed before October 18,
2016). Said differently, once no private sale closed by
October 18, 2016, the parties were obliged to work together to
close the April 29, 2016 transaction. To be sure, the
Stipulation was not an agreement for the sale of the property –
it did not purport to transfer title to one of the signatories –
nor was it a settlement – it did not relinquish any party’s
claims in the lawsuit. It was, however, an agreement with
discernible and enforceable terms, which “not only binds [the
parties], but which the courts are bound to enforce.” Okuhara,
51 Haw. at 256, 456 P.2d at 230.
Importantly, however, this rule is subject to
exceptions. We noted in Gakiya that “certain stipulations [may]
be set aside or modified in order to prevent manifest
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injustice.” 68 Haw. at 555, 722 P.2d at 464 (determining that
“the prevention of manifest injustice required . . . a departure
[from the stipulation] in this case” because enforcing the
stipulation would have left a party who had suffered “serious
financial injury” “with virtually no source of relief”); see
also 83 C.J.S. Stipulations § 1 (2020) (“Valid stipulations
entered into freely and fairly should not be lightly set aside,”
but may be “when their enforcement would result in serious harm
to one of the parties and the other party would not be
prejudiced by their being set aside.” (footnote omitted)). In
addition, “the parties’ stipulation as to a question of law is
not binding on the court[.]” Hawaiian Ass’n of Seventh-Day
Adventists, 130 Hawaiʻi at 46, 305 P.3d at 462.
Moreover, we recognize that the Stipulation was made
in the course of a mortgage foreclosure proceeding, which is
“equitable in nature and is thus governed by the rules of
equity.” Santiago v. Tanaka, 137 Hawaiʻi 137, 157, 366 P.3d 612,
632 (2016) (quoting Beneficial Haw., Inc. v. Kida, 96 Hawaiʻi
289, 312, 30 P.3d 895, 918 (2001)). “Courts of equity have the
power to mold their decrees to conserve the equities of the
parties under the circumstances of the case.” Peak Cap. Grp.,
LLC v. Perez, 141 Hawaiʻi 160, 179, 407 P.3d 116, 135 (2017)
(citation omitted). “In general, stipulations are not to be
lightly set aside.” In re Lenox, 902 F.2d 737, 739 (9th Cir.
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1990). In an equitable foreclosure proceeding, a trial court
should enforce the terms of a stipulation unless doing so would
be inequitable. Wilson v. Witt, 952 P.2d 214, 216 (Wyo. 1998)
(“[A court’s authority to alter or nullify a contract] does not
extend so far as to authorize a court of equity to disregard and
set aside a valid stipulation of the parties upon the
performance of which their rights are made to depend in the
absence of some equitable basis.” (emphasis added) (citation
omitted)).
Although trial courts generally have wide latitude to
deny sanctions, here, the record is devoid of any other basis
for which the sanctions motion was denied besides the erroneous
conclusion that the Stipulation was not binding. The circuit
court therefore erred, and we remand this case for further
proceedings.
This decision neither opines on whether sanctions
would or would not be appropriate on remand, nor suggests anyone
necessarily breached the Stipulation. Indeed, it may well be
the case that sanctions are inappropriate and that all parties
complied with the Stipulation’s terms. We write today solely to
clarify that agreements made during the course of litigation,
reduced to writing, signed by all parties, and given the
imprimatur of the court must generally be treated as binding.
“In essence, a stipulation is a contract, or at least akin to
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one, and is entitled to all the sanctity of a conventional
contract.” 83 C.J.S. Stipulations § 1 (2020) (footnotes
omitted). In addition to the well-established principles of law
undergirding this holding, sound policy reasons support it as
well. The stipulation in this case represented a mutual
agreement to pursue a sale that presumably would leave all
parties better off, potentially avoiding a costly judicial
process and resolving the litigation amicably. Agreement
between adversarial parties on issues during the litigation
makes the litigation process smoother and less costly for all.
But if stipulations are not given binding effect, then parties
will be less likely to enter into them for fear that they will
later be rendered toothless. In short, parties must be able to
rely on the terms of an agreement and arrange their affairs in
accordance therewith, and accordingly, absent a sufficient
reason to set them aside, stipulations are binding on those who
agree to them.
V. CONCLUSION
For the foregoing reasons, the ICA’s January 3, 2020
judgment on appeal and the circuit court’s May 5, 2017 judgment
are vacated in part, with respect to the circuit court’s
January 6, 2017 Order Denying Sanctions, but are otherwise
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affirmed. The case is remanded to the circuit court for
proceedings consistent with this opinion.
Glen T. Hale /s/ Mark E. Recktenwald
for petitioner
/s/ Paula A. Nakayama
Matthew M. Matsunaga and
Derek R. Kobayashi /s/ Sabrina S. McKenna
for respondent
/s/ Michael D. Wilson
/s/ Todd W. Eddins
31