Winn v. Brady. ( 2023 )

FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
19-DEC-2023
08:02 AM
Dkt. 93 OP
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
---o0o—
PETER J. WINN, WESTMINSTER REALTY, INC.,
Plaintiffs-Appellants
v.
WADE BRADY and KATHERINE T. BRADY, individually and
as trustees of the WADE K. BRADY FAMILY TRUST,
CONTEMPORARY KAMA#AINA, LLC, WESTMINSTER REALTY, INC.
as trustee of the 2806 KOLEPA PLACE TRUST DATED
DECEMBER 14, 2010, ERIC L. KEILLOR, ERIC S. HART,
Defendants-Appellees,
and
JAMES E. SPENCE, BEVERLY C. SPENCE, STEPHEN R. SPENCE,
and VALORIE A. SPENCE, Intervenors-Appellees,
and
JOHN DOES 1-10; DOE CORPORATIONS 1-10;
DOE PARTNERSHIPS 1-10; and DOE ENTITIES 1-10,
Defendants
NO. CAAP-XX-XXXXXXX
APPEAL FROM THE CIRCUIT COURT OF THE SECOND CIRCUIT
(CIVIL NO. 12-1-0087(1))
December 19, 2023
GINOZA, CHIEF JUDGE, WADSWORTH and NAKASONE, JJ.
OPINION OF THE COURT BY GINOZA, CHIEF JUDGE
Plaintiffs-Appellants Peter J. Winn (Winn) and
Westminster Realty, Inc. (collectively the Winn Parties) appeal
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from the post-judgment "Order Granting Intervenors James E.
Spence, Beverly C. Spence, Stephen R. Spence, and Valorie A.
Spence's Motion for Reconsideration of Order Granting Judgment
Creditors Peter J. Winn and Westminster Realty, Inc.'s Ex Parte
Motion for First Alias Writ of Execution" (Order Granting Spence
Motion for Reconsideration), filed October 11, 2017, by the
Circuit Court of the Second Circuit (Circuit Court).1
This appeal arises because the Winn Parties claim that
as known lienholders for the subject Haleakalâ Highway Property,
they were entitled to personal or actual notice of an execution
sale2 initiated by Intervenors-Appellees James E. Spence (James)
and Beverly C. Spence (Beverly) (collectively, the Spences),
regardless of their junior position to the Spences. The Spences
had a judgment against Defendant-Appellee Wade Brady (Brady), and
separately, the Winn Parties also had a judgment against Brady.
Brady, in turn, held a joint tenant interest in the Haleakalâ
Highway Property.3 The Spences executed their judgment on the
Haleakalâ Highway Property without personal or actual notice to
the Winn Parties.4
The Circuit Court held that the Winn Parties were not
entitled to actual notice of the execution sale from the Spences,
and that the Winn Parties' junior lien on the Haleakalâ Highway
Property was extinguished.
1
The Honorable Rhonda I.L. Loo presided.
2
An "execution sale" is "[a] forced sale of a debtor's property by a
government official carrying out a writ of execution." Black's Law Dictionary
1604 (11th ed. 2019). See generally Hawaii Revised Statutes ( HRS) Chapter
651, Part II (Execution) (providing statutory authority for executions upon
judgments or decrees of a court).
3
Brady and Wesley Nohara were joint tenant owners of the Haleakal â
Highway Property.
4
As explained in more detail infra, the high bidder at the execution
sale was a company for which the Spences served as managers. Subsequently, a
50% interest in the Haleakalâ Highway Property was transferred to the Spences.
The other 50% interest in the property was acquired by Intervenors-Appellees
Stephen R. Spence and Valorie A. Spence, who were not involved in the
execution sale of the property.
2
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On appeal, the Winn Parties contend the Circuit Court
erred by: (1) concluding that the Winn Parties were not entitled
to personal or actual notice of the execution sale of the
Haleakalâ Highway Property, which violated their constitutional
right to due process; (2) concluding that the Winn Parties'
junior lien on the Haleakalâ Highway Property was extinguished by
the execution sale, for which the Winn Parties did not receive
personal or actual notice; and (3) failing to consider that the
Spences benefitted from the failure to provide the Winn Parties
with proper notice of the execution sale.5 The Winn Parties'
first two points of error are dispositive.
We hold that the Winn Parties' recorded judgment lien,
pursuant to Hawaii Revised Statutes (HRS) § 636-3 (Supp. 2012),6
created a property interest in the Haleakalâ Highway Property.
The Winn Parties were thus entitled to notice consistent with due
process when the Spences conducted the execution sale of the
Haleakalâ Highway Property under HRS Chapter 651. The notice
provided to the Winn Parties did not meet due process standards.
We thus vacate the Order Granting Spence Motion for
Reconsideration entered by the Circuit Court and remand this case
for further proceedings.
5
The Winn Parties also assert the Circuit Court erred in not rejecting
the Spences' argument that the Winn Parties were estopped from raising their
due process claims. In the Circuit Court, the Spences argued estoppel on
grounds that the Winn Parties failed to provide actual notice to them for an
execution sale on another property. We need not reach this issue because the
Circuit Court did not rule on estoppel grounds and the Spences do not argue
estoppel in this appeal.
6
HRS § 636-3 (Supp. 2012) provides, in relevant part:
Judgment, orders, decrees; lien when. Any money judgment,
order, or decree of a state court or the United States
District Court for the District of Hawaii shall be a lien
upon real property when a copy thereof, certified as correct
by a clerk of the court where it is entered, is recorded in
the bureau of conveyances.
(Emphasis added.)
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I. Background
A. The Winn Action - This Case
On January 25, 2012, the Winn Parties commenced this
case by filing a Complaint against Defendants-Appellees Wade
Brady and Katherine T. Brady (collectively, the Bradys),
Individually and as Trustees of the Wade K. Brady Family Trust,
and Contemporary Kama#aina, LLC (Contemporary Kama#aina), amongst
others, in Civil No. 12-1-0087(1) (Winn Action). The Winn
Parties alleged, inter alia, breach of a joint venture agreement
to develop a property in Lahaina, Maui. On January 17, 2013, the
Circuit Court entered an Amended Judgment in favor of the Winn
Parties and against the Bradys and Contemporary Kama#aina,
awarding approximately $955,000 for the breach of the joint
venture agreement, and attorney's fees and costs (Winn Judgment).
The Winn Judgment was recorded in the State of Hawai#i Bureau of
Conveyances (Bureau of Conveyances) on February 6, 2013.
B. The Spence Action
In a separate action, the Spences obtained a judgment
in Civil No. 08-1-0584(1) (Spence Action) against the Bradys and
other parties, jointly and severally, on October 28, 2010, for
approximately $152,000 (Spence Judgment). The Spence Judgment
was recorded in the Bureau of Conveyances on March 9, 2011.
On October 17, 2014, the Circuit Court granted the
Spences an ex parte motion for writ of execution on the Haleakalâ
Highway Property. On December 19, 2014, pursuant to HRS § 651-38
(2016),7 the Spences obtained a First Alias Writ of Execution
7
HRS § 651-38 provides:
Alias Writs. Any circuit court, out of which an execution
has been issued, if such execution has been returned
unsatisfied wholly or in part, may issue an alias execution
to the same circuit, or an execution leviable in some other
circuit, for the satisfaction of the unpaid remainder of the
judgment and additional costs, expenses, and commissions,
which alias or testatum writ of execution shall be served in
like manner as the original.
In other words, alias writs of execution may be issued when the original
writ of execution is not satisfied.
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against Wade Brady's joint-tenant interest in the Haleakalâ
Highway Property (Spence First Alias Writ of Execution).
Attached to the Spence First Alias Writ of Execution as an
exhibit was a Status Report for the Haleakalâ Highway Property,
which listed the Winn Judgment and the Spence Judgment as
exceptions to title.
After recording the Spence First Alias Writ of
Execution on Wade Brady's interest in the Haleakalâ Highway
Property, the Spences posted written notices of the execution
sale in accordance with HRS § 651-43 (2016)8 on January 4, 2015.9
No actual or personal notice was provided to the Winn Parties.
On June 3, 2015, the Circuit Court granted the Spences' motion to
confirm the sale of the Haleakalâ Highway Property in the amount
of $25,001, and directing that the property be conveyed to
Haleakala Estate Properties, LLC (HEP LLC) as the highest bidder.
Subsequently, by way of a quitclaim deed recorded on
October 13, 2016, HEP LLC and Wesley Nohara, as grantors,
conveyed an undivided 50% interest in the Haleakalâ Highway
Property to the Spences, and conveyed the other undivided 50%
interest in the property to Stephen Spence (Stephen) and Valorie
Spence (Valorie). The quitclaim deed was executed for HEP LLC by
the Spences as its managers.
8
HRS § 651-43 provides:
The officer shall, after levy, advertise for sale the property
levied upon, whether real or personal, for thirty days, or for
such time as the court shall order, by posting a written or
printed notice in three conspicuous places within the district
where the property is situated, and if on the island of Oahu, by
advertisement thereof at least three times in one or more
newspapers published in Honolulu.
9
The Spences posted written notice at four locations: (1) the front
door of the Haleakalâ Highway Property; (2) the public bulletin board outside
of the Makawao Public Library; (3) a "public posting board" at the Wailuku
Courthouse; and (4) the Makawao post office.
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C. The Winn Parties Contest the Sale of the
Haleakalâ Highway Property
In this case, on May 23, 2017, the Winn Parties filed
an ex parte motion for first alias writ of execution on the
Haleakalâ Highway Property (Winn Motion for First Alias Writ of
Execution),10 arguing that HEP LLC's purchase of the Haleakalâ
Highway Property is subject to the Winn Judgment because the Winn
Parties were not provided notice of the execution sale.
The Circuit Court granted the Winn Motion for First
Alias Writ of Execution on May 23, 2017 (Order Granting Winn
First Alias Writ of Execution). On June 7, 2017, the Spences,
Stephen, and Valorie filed a motion to intervene in this case
with respect to the Order Granting Winn First Alias Writ of
Execution. On July 18, 2017, the Circuit Court granted the
request to intervene. On July 20, 2017, the Winn Parties filed a
Motion to Amend First Alias Writ of Execution or, in the
Alternative to Issue Second Alias Writ of Execution (Winn Motion
to Amend First Alias Writ of Execution) based on new information
that HEP LLC had transferred title to the Haleakalâ Highway
Property to the Spences, Stephen, and Valorie. On July 26, 2017,
the Spences, Stephen, and Valorie filed a motion for
reconsideration of the Order Granting Winn First Alias Writ of
Execution (Spence Motion for Reconsideration) requesting that the
Circuit Court reverse the order. They argued that the Order
Granting Winn First Alias Writ of Execution was moot in that HEP
LLC no longer owned the Haleakalâ Highway Property, the Winn
Parties had no right to the Haleakalâ Highway Property because
their lien was extinguished by the execution sale, and the Winn
Parties' argument regarding the lack of notice of the execution
sale was without merit.
At a hearing on August 22, 2017, the Circuit Court
denied the Winn Motion to Amend First Alias Writ of Execution,
stating:
10
The Circuit Court had previously granted the Winn Parties a writ of
execution pursuant to HRS § 651-36 (2016) on June 25, 2013.
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The Court having had an opportunity to review
the motion, the opposition, the reply, having heard
the oral arguments in court this morning, the Court's
going to deny [the] motion for -- to amend the first
alias writ of execution or, in the alternative, to
issue a second alias writ of execution.
The Court does find clearly that Mr. Winn sat on
his rights for many years. The Court also finds that
Mr. Winn's junior lien was extinguished back in 2015,
and that, lastly, though you folks have made good
arguments, the Court believes as well that Mr. Winn
was not entitled to actual notice.
On October 11, 2017, the Circuit Court entered the
Order Granting Spence Motion for Reconsideration. The effect of
this order is to preclude the Winn Parties from executing the
Winn Judgment on the Haleakalâ Highway Property.
The Winn Parties timely appealed.
II. Standards of Review
A. Constitutional Questions
"The appellate court reviews questions of
constitutional law de novo, under the right/wrong standard."
Hussey v. Say, 139 Hawai#i 181, 185, 384 P.3d 1282, 1286 (2016)
(citation, underlining, and internal quotation marks omitted).
B. Statutory Interpretation
"The interpretation of a statute is a question of law
reviewable de novo." Ka Pa#akai O Ka#Aina v. Land Use Comm'n, 94
Hawai#i 31, 41, 7 P.3d 1068, 1078 (2000) (quoting Amantiad v.
Odum, 90 Hawai#i 152, 160, 977 P.2d 160, 168 (1999)).
III. Discussion
A. The Winn Parties Were Entitled to Notice Reasonably
Calculated to Apprise Them of the Execution
Sale and Provide an Opportunity to Object
On appeal, the Winn Parties contend their
constitutional right to due process was violated because they
were entitled to, and did not receive, personal or actual notice
of the execution sale of the Haleakalâ Highway Property as known
judgment creditors of the Bradys. In particular, the Winn
Parties argue due process requires that they be afforded notice
reasonably calculated under the circumstances to inform them of
the execution sale, and that compliance with the posting of
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notice under HRS § 651-43 did not constitute notice reasonably
calculated under the circumstances given evidence of the Spences'
communications with Winn and knowledge of the Winn Parties'
interest in the Haleakalâ Highway Property. The Spences do not
dispute that they had knowledge of the Winn Parties' recorded
judgment against the Bradys, and they also do not dispute Winn's
declaration stating that they knew how to contact him.
The Spences contend that pursuant to HRS § 651-43, the
Winn Parties were not entitled to notice beyond posting.
Further, the Spences contend that as junior judgment creditors of
the Bradys, the Winn Parties did not have constitutionally
protected property rights in the Haleakalâ Highway Property.
1. The Winn Parties had a property interest in the
Haleakalâ Highway Property
The threshold inquiry is whether a recorded judgment
serves as a lien on a property, entitling the lienholder to
notice according to due process. The Winn Parties assert,
pursuant to HRS § 636-3, that the Winn Judgment was a recorded
lien and they had a property interest in the Haleakalâ Highway
Property.
The Spences contend, to the contrary, that a judgment
does not create a property right, only a right to levy on the
property. The Spences cite to Lindsey v. Kainana, 4 Haw. 165(Haw. Kingdom 1879), for the proposition that because "[Hawai#i
has] no statute making a judgment of Court of Record a lien upon
real estate in the nature of a subsisting incumbrance[,]" a
"judgment constitutes no property or right in the land. It only
confers a right to levy on the same." Id. at 168-69. The
Spences also cite In re Lopez' Estate, 19 Haw. 620 (Haw. Terr.
1909), for a similar proposition that "a judgment of itself gives
no lien and a creditor gains nothing by obtaining it." Id. at
623.
The Winn Parties respond that Kainana and In re Lopez'
Estate are inapposite because those cases relied on the lack of
any statutory authority at the time the cases were decided making
a recorded judgment a lien on property. The Winn Parties argue
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both cases were decided prior to 1913, when the Legislature first
enacted a statute allowing a recorded judgment to become a lien
on real property. Pursuant to HRS § 636-3, the statute in effect
when the execution sale in this case occurred, the Winn Parties
contend the recorded Winn Judgment created a lien on the
Haleakalâ Highway Property and a property interest.
The Winn Parties' analysis is persuasive. The
predecessor to HRS § 636-3 was adopted in 1913, after the Kainana
and In re Lopez' Estate decisions were issued. 1913 Haw. Sess.
Laws Act 32, § 1 at 36. Although there is no case law explicitly
interpreting HRS § 636-3 as creating a property interest in real
property that entitles a lienholder to due process, the Hawai#i
Supreme Court has stated that "HRS § 636-3 grants a judgment
creditor an automatic lien on any real property of the judgment
debtor." Bank of Hawaii v. Shinn, 120 Hawai#i 1, 4 n.8, 200 P.3d
370, 373 n.8 (2008) (emphasis added). Here, under HRS § 636-3,
the Winn Parties were judgment lienholders on the Haleakalâ
Highway Property because they obtained a judgment against the
Bradys and recorded the judgment in the Bureau of Conveyances on
February 6, 2013. Further, as recognized by the Supreme Court of
New Jersey, "a judgment lien is a property interest subject to
due-process protections." New Brunswick Sav. Bank v. Markouski,
587 A.2d 1265, 1270, 1275 (N.J. 1991) (concerning a statute
providing that a docketed judgment is a lien on all real property
held by the judgment debtor in the state, and holding that the
judgment creditor was entitled to actual notice of execution sale
in accordance with due process); see also In re Upset Sale, Tax
Claim Bureau of Berks County, 479 A.2d 940, 944 (Pa. 1984)
(holding that a judgment lien was a protectable property
interest). We thus conclude that the Winn Parties have a
property interest that entitled them to notice consistent with
due process.
Moreover, the Winn Parties were listed in the Status
Report regarding title for the Haleakalâ Highway Property as
creditors of the Bradys based on the recorded Winn Judgment. The
Status Report was attached to the Spence First Alias Writ of
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Execution. Thus, the Spences knew or reasonably should have known
that the Winn Parties had a judgment lien on the property.
2. Posting of written notice was insufficient to
satisfy the Winn Parties' due process right as
known lienholders
Here, the Spences gave notice of the execution sale by
posting written notice pursuant to HRS § 651-43. As to whether
such notice satisfies due process for a known lienholder, the
United States Supreme Court has established the general rule that
"[a]n elementary and fundamental requirement of due process in
any proceeding which is to be accorded finality is notice
reasonably calculated, under all the circumstances, to apprise
interested parties of the pendency of the action and afford them
an opportunity to present their objections." Mullane v. Cent.
Hanover Bank & Tr. Co., 339 U.S. 306, 314 (1950) (citations
omitted) (concluding that a state statute permitting notice by
publication alone to trust beneficiaries whose names and
addresses were known did not satisfy constitutional due process).
The reasonableness and hence the constitutional validity of
any chosen method may be defended on the ground that it is
in itself reasonably certain to inform those affected, or,
where conditions do not reasonably permit such notice, that
the form chosen is not substantially less likely to bring
home notice than other of the feasible and customary
substitutes.
Id. at 315 (citations omitted); see also Cate v. Archon Oil Co.,
Inc., 695 P.2d 1352, 1355 (Okla. 1985) ("Notice by publication
and by posting are designed primarily to attract prospective
purchasers, and are unlikely to reach those who have an interest
in the property.").
The Mullane due process principle has also been applied
in Hawai#i. In Freitas v. Gomes, 52 Haw. 145, 472 P.2d 494(1970), the Hawai#i Supreme Court cited Mullane in stating
"[p]rocedural due process requires that, under all the
circumstances, notice must be reasonably calculated to apprise
interested [parties] of the pendency of any proceeding which is
to be accorded finality." Id. at 152, 472 P.2d at 498. The
Hawai#i Supreme Court concluded that a statute only requiring
notice by publication for a proceeding to administer an estate
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and distribute property was "constitutionally insufficient by
itself because it was not supplemented by notice by mail or
personal service." Id. at 151-52, 472 P.2d at 498-99. The court
held that:
notice of the pendency of a proceeding in the administration
of an estate which affords finality to a decree of
distribution must, in addition to being published as
required by the statute be mailed, where the names and
addresses of interested persons are known, or by reasonable
diligence can be ascertained by executors or administrators,
unless notice is otherwise personally served.
Id. at 152, 472 P.2d at 499 (emphasis added).
Although no Hawai#i case has explicitly applied this
due process principle to a real property execution sale by a
judgment creditor,11 the Hawai#i Supreme Court, in Freitas, noted
that:
In addition to Mullane the United States Supreme Court has
held that a standard of reasonable diligence is required in
seeking out interested parties in the following cases. Bank
of Marin v. England, 385 U.S. 99 (1966) (bankruptcy); Walker
v. City of Hutchinson, 352 U.S. 112 (1956) (resident
property owners in eminent domain proceedings); Covey v.
Town of Somers, 351 U.S. 141, 146 (1956) (tax foreclosure
against property of an incompetent who had no guardian);
City of New York v. New York, N.H.& H.R.R., 344 U.S. 293,
296 (1953) (creditors in bankruptcy proceeding) ("Notice by
publication is a poor and sometimes a hopeless substitute
for actual service of notice. Its justification is
difficult at best."); Standard Oil v. New Jersey, 341 U.S.
428 (1951) (escheat).
This court alluded to a requirement of personal notification
whenever possible in In re Complaint of Vockrodt, 50 Haw.
201, 206 n.7, 436 P.2d 752, 755 n.7 (1968) citing Mullane,
supra [339 U.S.] at 313.
Id. at 152 n.4, 472 P.2d at 498 n.4 (format altered).
Furthermore, the Oklahoma Supreme Court has explained
that:
Theoretically, publication may be available for all the
world to see, but it is presumptuous to suppose that anyone
could read all that is published to see if something may be
reported which affects his/her property interest. Exclusive
reliance on an inefficacious means of notification cannot be
permitted under the Mullane doctrine — neither necessity nor
efficiency can abrogate the rule that, within the limits of
practicability, notice must be reasonably calculated to
reach the interested parties. If the names of those
affected by a proceeding are available, the reasons
11
In Klinger v. Kepano, 64 Haw. 4, 13-16, 635 P.2d 938, 944-46 (1981),
the Hawai#i Supreme Court applied Mullane narrowly to a tax lien foreclosure
case.
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disappear for resorting to means less likely than the mails
to apprise them of the pending sale. Mail service can be
utilized as an inexpensive and efficient mechanism to
enhance the reliability of the otherwise unreliable
procedure of notice by publication.
Cate, 695 P.2d at 1356 (emphasis added) (citing Greene v.
Lindsey, 456 U.S. 444, 455 (1982); Schroeder v. City of New York,
371 U.S. 208, 213 (1962); Mullane, 339 U.S. at 318-20) (holding
that the execution sale of an oil and gas lease by a judgment
creditor violated due process because notice was by publication
under state statute, but debtor as well as any other persons with
a reasonably known security interest in the lease was entitled to
proper notice reasonably calculated to reach them).
In light of the relevant authority from the U.S.
Supreme Court, the Hawai#i Supreme Court, and other persuasive
authorities considering due process in the context of affecting a
property interest, we adopt the rule established in Mullane and
its progeny with respect to execution sales by judgment
creditors.12 See e.g., Mennonite Bd. of Missions v. Adams, 462
U.S. 791, 797-98 (1983) (extending due process principle in
Mullane to a mortgagee for purposes of a tax sale); Walker, 352
U.S. at 115-17 (applying Mullane to condemnation proceeding where
city knew name of land owner but only provided publication
notice). In other words, for purposes of execution sales by
judgment creditors, we hold that due process requires notice
reasonably calculated to reach lienholders of the subject
property, to inform them of the execution sale and allow them an
opportunity to object, notwithstanding the limited notice
required under HRS § 651-43. See Mullane, 339 U.S. at 314, 317-
18; see also In re Vockrodt, 50 Haw. at 205 n.5, 436 P.2d at 755
n.5 (resorting to publication notice is permissible where it is
not reasonably possible or practicable to give more adequate
notice, such as when a person is missing or unknown (citing
Mullane, 339 U.S. at 317)).
12
The Spences argue that affording the Winn Parties actual or personal
notice conflicts with HRS § 651-43. However, the Hawai #i Supreme Court has
recognized that "historical procedures must yield to changing concepts of
fairness which the due process clause requires." Freitas, 52 Haw. at 152, 472
P.2d at 498-99.
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Extending Mullane to this case, an interested party,
i.e., a party with a protected property interest at stake, must
be identified. See 339 U.S. at 313. Next, Mullane recognizes
personal service is not required in all circumstances. Id. at
314. However, where interested parties are identifiable, "notice
must be of such nature as reasonably to convey the required
information, and it must afford a reasonable time for those
interested to make their appearance[.]" Id. (citations omitted).
Specifically, "[w]here the names and post office addresses of
those affected by a proceeding are at hand, the reasons disappear
for resort to means less likely than the mails to apprise them of
its pendency." Id. at 318; cf. Schroeder, 371 U.S. at 212-13("The general rule that emerges from the Mullane case is that
notice by publication is not enough with respect to a person
whose name and address are known or very easily ascertainable and
whose legally protected interests are directly affected by the
proceedings in question.").
Here, due process principles required the Spences to
provide the Winn Parties with personal notice of the execution
sale. The Winn Parties had a protected property interest in the
Haleakalâ Highway Property because the Winn Judgment against the
Bradys was recorded and thus the Winn Parties had a judgment lien
on the property. Further, the Spences were aware, or should have
been aware, of the Winn Parties' recorded judgment lien based on
the Status Report regarding title for the Haleakalâ Highway
Property. Winn also submitted a declaration attesting that
Beverly had called him multiple times prior to the execution
sale, and that the Spences knew about the Winn Judgment, knew
that it had been recorded, and knew that it was a lien on the
Haleakalâ Highway Property. Winn further attested the Spences
knew his telephone number and other information by which they
easily could have contacted him.13 The Spences do not dispute
these assertions in Winn's declaration. Thus, the Winn Parties
13
The record also establishes that Winn was president of Westminster
Realty, Inc.
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were entitled to personal notice of the execution sale because
Winn's identity was known and his personal contact information
was known and/or ascertainable through reasonable diligence by
the Spences.
3. The notice requirements in HRS § 651-43 exist
separate and apart from procedural due process
notice requirements
Pursuant to this court's Order Regarding Rule 44 of the
Hawai#i Rules of Appellate Procedure, filed on September 5, 2023,
the Attorney General of the State of Hawai#i (Attorney General)
submitted an amicus curiae brief (Amicus Brief) in response to
this court's suggestion that "the Appellants' arguments appear to
call into question the constitutionality of HRS § 651-43 (2016)[]
for not meeting due process requirements with respect to the
execution sale that is the subject of this appeal."
In its Amicus Brief, the Attorney General asserts that
the constitutionality of HRS § 651-43 is not at issue because (1)
Winn does not challenge the constitutionality of the statute, (2)
HRS § 651-43 remains valid regardless of whether a judgment lien
creates a property right for purposes of due process, and (3) the
form of notice required is dependent on the specific
circumstances of each case.
We agree that Winn does not expressly challenge the
constitutionality of HRS § 651-43 and that the posting and
advertisement requirements in HRS § 651-43 serve purposes
separate and apart from notifying individual parties that may
have property interests in the property to be sold, such as
advertising the sale to the general public. HRS § 651-43 does
not preclude other and additional forms of notice that may, in
certain circumstances, be necessitated by procedural due process.
Therefore, we conclude the posting and advertisement requirements
in HRS § 651-43 and the specific notice required by due process
are separate considerations, and we need not address the
constitutionality of HRS § 651-43.
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B. The Winn Parties' Junior Position Did Not
Affect Their Entitlement to Notice
Besides challenging the Winn Parties' entitlement to
personal or actual notice as lienholders for the Haleakalâ
Highway Property, the Spences assert the Winn Parties were not
entitled to notice given their junior lienholder status. The
Spences point out that their judgment against Brady was recorded
almost two years before the Winn Parties recorded their judgment
against Brady. Further, the Spences note that HRS § 651-41
(2016)14 provides priority in levying to writs of execution
"according to the order of time in which they are received[,]"
such that their writ of execution had priority. The Spences
ultimately contend that once they executed on their senior lien
on the Haleakalâ Highway Property, the junior lien held by the
Winn Parties was extinguished.
With respect to notice, however, a junior lien does not
make a creditor any less worthy of constitutional due process
prior to an execution sale. Under the principles set out by the
U.S. Supreme Court in Mullane, due process requires notice to
"interested parties." 339 U.S. at 314. In Freitas, addressing
notice to beneficiaries of an estate, the Hawai#i Supreme Court
applied Mullane and stated that "[a] requirement that there be a
reasonable probability that all interested parties are noticed of
the pendency of a proceeding accorded finality does not breach
the 'limits of practicality' cautioned by Mullane . . . by
increasing delay and cost." 52 Haw. at 152, 472 at 499 (emphasis
added) (citation omitted). In Cate, the Supreme Court of
Oklahoma dealt with a sheriff's sale and expressed that the
"debtor, as well as any other persons who have a security
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HRS § 651-41 provides:
Priority in levying. Every officer receiving a writ of
execution issued in due form by any court or judge, shall
note thereon the day and hour of its receipt, and the
officer shall give priority in levying upon property of the
defendant in execution, to the writs received by the officer
according to the order of time in which they are received.
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FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
interest in the property must be notified properly of even a
possible sale." 695 P.2d at 1355 (emphasis added).
The decision by the Supreme Court of New Jersey in
Markouski is particularly instructive. There, the court
discussed the rights of a nonlevying judgment creditor, similar
to the Winn Parties in this case. 587 A.2d at 1275-77. The
court recognized that "a judgment lien is a property interest
subject to due-process protections[,]" where under New Jersey law
"a judgment creditor's interest in the property is created on the
docketing of a lien." Id. at 1275. The court also noted that:
when a nonlevying judgment creditor is notified of an
execution sale, it can protect itself by bidding at the
sale. Notice additionally benefits both the levying
creditor and the judgment debtor by potentially making the
bidding more competitive.
Id. The court also noted that, under New Jersey law, "the
levying creditor is still rewarded for its diligence by gaining
priority over the nonlevying creditor in the distribution of the
proceeds of the sale." Id. at 1276. Given these circumstances,
the court held that "a levying creditor must provide actual
notice of an execution sale to judgment creditors whose names and
addresses are reasonably ascertainable." Id. at 1277 (emphasis
added).
Contrary to the Spences arguments in this case,
Markouski expressly recognized that a nonlevying judgment
creditor is entitled to notice consistent with due process, even
though the levying judgment creditor had a senior position. This
is consistent with the principle in Mullane and its progeny that
"interested parties" are entitled to proper notice.
The Spences rely on two cases that are distinguishable.
First, they cite Belden v. Donohue, 325 S.W.3d 515, 519 (Mo. Ct.
App. 2010), where the court held "no statute or rule requires
that notice of a Sheriff's sale be provided to other lienholders,
especially those whose interests are junior to the interest which
is the catalyst for the Sheriff's sale." Second, they cite Camp
Finance, LLC v. Brazington, 135 P.3d 946, 950 (Wash. Ct. App.
2006), where the court determined that a statute requiring a
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FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
judgment creditor to provide notice of an execution sale only to
a judgment debtor excluded notice to junior lienholders. Both
Belden and Camp Finance are unhelpful, however, because neither
address notice required under due process principles. In this
case, to the contrary, the Winn Parties expressly challenged the
lack of notice based on due process grounds in the Circuit Court
and in this appeal.
We thus conclude that the Winn Parties' junior
lienholder status did not affect their entitlement to notice
consistent with due process.
IV. Conclusion
Based on the above, we vacate the "Order Granting
Intervenors James E. Spence, Beverly C. Spence, Stephen R.
Spence, and Valorie A. Spence's Motion for Reconsideration of
Order Granting Judgment Creditors Peter J. Winn and Westminster
Realty, Inc.'s Ex Parte Motion for First Alias Writ of
Execution," filed on October 11, 2017. We remand this case to
the Circuit Court of the Second Circuit for further proceedings
consistent with this opinion.
On the briefs:
Lance D. Collins, /s/ Lisa M. Ginoza
Law Office of Lance D. Collins, Chief Judge
for Plaintiffs-Appellants
/s/ Clyde J. Wadsworth
Stephen R. Spence and Associate Judge
Valorie A. Spence,
Self-represented /s/ Karen T. Nakasone
Intervenors-Appellees Associate Judge
Joseph A. Stewart,
Aaron R. Mun,
Kobayashi Sugita & Goda, LLP,
for Intervenors-Appellees
James E. Spence and
Beverly C. Spence
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