Gomez v. Pagaduan, 1 Haw. App. 70, 613 P.2d 658 (Haw. App. 1980)
Legal information, not legal advice. Verify against the cited opinion.
- Citation: 1 Haw. App. 70, 613 P.2d 658 (1980); 1980 Haw. App. LEXIS 104.
- Court / Year: Intermediate Court of Appeals of Hawaii, 1980.
- Topic tags: forfeiture · disclosure · agreement_of_sale · liquidated_damages
- Facts: Sellers and buyers entered an agreement of sale for a condominium apartment in Aiea, Hawaii (price $60,000). The agreement provided that on the buyer’s default the seller could elect to retain all payments as liquidated damages and cancel. The buyers defaulted; the seller sought to keep the installments paid and recover possession. The market value had depreciated, so the litigation centered on whether the seller could enforce the liquidated-damages/forfeiture provision.
- Holding: This was the first Hawaii appellate decision to address enforceability of a liquidated-damages (forfeiture-of-payments) clause in an agreement of sale. The court held that where the buyer’s breach does not involve bad faith, a clause allowing the seller to retain payments as liquidated damages may be enforced only if there is a reasonable relationship between the amount retained and the seller’s actual damages. The seller “is not, absent purchaser’s bad faith, entitled to forfeiture” beyond that reasonable-relationship measure.
- Reasoning: Building on jenkins-v-wise-1978, the court treated an agreement of sale as akin to a financing instrument and applied equitable anti-forfeiture and liquidated-damages/penalty principles (consistent with the UCC’s reasonableness approach Hawaii courts have borrowed in analogous contexts). Retention of payments grossly exceeding actual damages is an unenforceable penalty when the buyer did not act in bad faith.
- Practical impact for CFD operators/buyers: Gomez establishes the operative test in Hawaii for a seller who wants to keep a defaulting buyer’s payments: the retention must bear a reasonable relationship to actual damages unless the buyer breached in bad faith. A Hawaii seller cannot count on pocketing all installments by contract clause; the burden is on the party enforcing the clause to prove the reasonable relationship. This is the forfeited-payments / liquidated-damages rule that complements Jenkins’s relief-from-forfeiture rule.
- Good-law status: Good law; followed and cited (e.g., Kaiman Realty, Inc. v. Carmichael, 65 Haw. 637, 655 P.2d 872 (1982); Scotella v. Osgood, 4 Haw. App. 20, 659 P.2d 73 (1983)).
- Source (retrieved): https://www.courtlistener.com/opinion/1144806/gomez-v-pagaduan/ · Verified: 2026-06-08 (citation, court, and 1980-06-27 decision date confirmed via CourtListener opinion index; holding corroborated by Iwamoto, Liquidated Damages in Hawaii Real Estate Purchase and Sale Agreements, The Practical Real Estate Lawyer (Sept. 2019), https://www.honolulu-lawyers.com/static/2023/10/prel1909_iwamoto.pdf). Pincite to the “reasonable relationship” / “absent purchaser’s bad faith, entitled to forfeiture” language is at 1 Haw. App. at 75, 613 P.2d at 661-62 per that article.
Jurisdictions that follow / cite: hawaii
Disclaimer. Legal information, not legal advice. Confirm the opinion is still good law before relying on it.