Kawauchi v. Tabata

49 Haw. 160, 413 P.2d 221 (1966)

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Kawauchi v. Tabata

Hawaii Supreme Court
49 Haw. 160, 413 P.2d 221 (1966)

Facts

Toichi Kawauchi (plaintiff) owned property that was facing foreclosure but was unable to obtain a loan. Kawauchi entered into an agreement with a group of doctors (the doctors’ group) (defendants) for Kawauchi to sell the property to the group, which would lease the property back to Kawauchi with an option for Kawauchi to repurchase the property. To avoid imminent foreclosure, Kawauchi and the doctors’ group first entered into a temporary deal to secure a loan on the basis of a mortgage and a promissory note given by Kawauchi to the doctors’ group and assigned to the lending bank. Kawauchi later sold the property to the doctors’ group for $90,000, well below market value. Simultaneously, the doctors’ group and Kawauchi agreed to a three-year lease agreement. Kawauchi would lease the property for $650 monthly, and Kawauchi retained the right to repurchase the property for $117,000 within three years. Kawauchi failed to repurchase the property. The doctors’ group refused to extend the lease and buyback option and terminated the lease. Kawauchi sued, arguing that the deal constituted a mortgage rather than a sale and that he retained a right of redemption. The court rejected the argument, holding that the transaction was a sale and a lease with the right to repurchase. Kawauchi appealed.

Rule of Law

Issue

Holding and Reasoning (Lewis, J.)

Dissent (Wirtz, J.)

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