Intermediate Court of Appeals of Hawaii
635 P.2d 562 (Haw. Ct. App. 1981)
Charles and Elizabeth Benton (defendants) owned a condo. The Bentons had executed a mortgage on the property in favor of Amfac Financial (Amfac) for $31,800. The mortgage contained a provision requiring the Bentons to get Amfac’s consent to any sale or have the balance accelerated. The Bentons negotiated to sell their condo to Philip Harder for $44,500. Under the terms of the Deposit, Receipt, Offer and Acceptance (DROA) contract, Harder agreed to pay $7,000 in cash and the $37,500 balance over three years at a 9 percent interest rate in monthly installments of at least $325. The DROA stated that the condo was being sold subject to Amfac’s mortgage, but the parties agreed that the property was to transfer free of the mortgage. Harding assigned his interest under the DROA to Dean and Barbara Schrader (plaintiffs). The Bentons did not want to pay off the mortgage at closing. Rather, the parties would enter a wrap-around financing agreement, under which the Bentons would continue making payments on the mortgage as the Schraders paid installments to them. This would allow the Schraders to avoid the high interest of an institutional mortgage loan and the Bentons to enjoy a greater rate of return on the sale. After paying off the mortgage, the Bentons stood to earn $12,700 on the sale. The DROA required consent of any necessary third parties. Amfac would not consent to the sale free of its mortgage but would have permitted the Schraders to assume the obligation, which the Bentons rejected. The Schraders sued for specific performance. Both sides moved for summary judgment, which the court granted in favor of the Schraders. The trial court gave the Schraders the option to pay the purchase price in cash or assume the loan, in which case the Bentons would remain secondarily liable for two years. The Bentons appealed to the Intermediate Court of Appeals of Hawaii
Rule of Law
Holding and Reasoning (Burns, J.)
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