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Construction Services of Samoa, Inc. v Bank of Hawaii [2004] ASHC 2; 8 ASR3d 192 (22 June 2004)

OPINIONS

OF THE

TRIAL DIVISION

OF THE

HIGH COURT OF AMERICAN SAMOA

(2004)

CONSTRUCTION SERVICES OF SAMOA, INC., MORU MANE and SALLIE MANE,
Plaintiffs,

v.

BANK OF HAWAII, TONY'S CONSTRUCTION
and SILA POASA,
Defendants.

High Court of American Samoa
Trial Division

CA No. 21-02

June 22, 2004

[1] To constitute conversion of a chattel, there must be an unauthorized assumption of the right to possession or ownership. A plaintiff must show a tortious conversion of the chattel, a right to the property, and an absolute and unconditional right to immediate possession of the property.

[2] In the case of secured transactions, one incident of the obligation to exercise good faith is that a creditor who seizes and sells a thing to satisfy his debt must exercise due diligence to secure a fair price for it. This obligation has been codified by statute in all fifty states; where it does not require a judicial foreclosure or an advertised public sale it at least requires the sale be conducted in accordance with commercially reasonable practices and that there be notice to the mortgagor.

[3] Notice enables the debtor to protect his interest in the property by paying the debt, finding a buyer, or being present at the sale to bid on the property or have others do so, to the end that it be not sacrificed by a sale at less than its true value.

[4] Although notice and commercial reasonableness are related but independent requirements, if no notice or a defective notice is given, the creditor acts in a commercially unreasonable manner.

[5] Where a security holder, proceeding as permitted by the security instrument, secures possession of the security and sells it at a private forced sale, he should exercise due diligence to get the best price obtainable at such a sale, and if he fails so to do and sells the security for less than he could have obtained by the exercise of such diligence, he is liable to the debtor for the difference between the price obtained and the price he could have obtained by the exercise of such diligence.

[6] The right of setoff is an ancient doctrine tracing its origin back to the Roman doctrine of "compensatio," which is the extinction of cross-demands. This right allows entities that owe each other money to apply their mutual debts against each other, thereby avoiding the absurdity of making A pay B when B owes A.

[7] The right to setoff usually exists when four conditions are met: (1) the funds to be setoff are property of the debtor; (2) the funds are deposited without restrictions; (3) the existing indebtedness is due and owing; and (4) there is mutuality of obligation.