The following excerpt is from Hawaii Production Credit Ass'n v. Long and Melone, Ltd., 923 F.2d 862 (9th Cir. 1991):
In addition, the district court relied upon three cases interpreting Hawaii law. None are controlling. Castle v. Smith, 7 Hawaii 579 (1889) involved a conveyance of stock by a debtor to a creditor. The envelope containing the stock bore an inscription that the stock was "for security" of the creditor. The debtor's representative contended that the conveyance was intended only to pledge dividends for application to the indebtedness. The court held that the writing evinced an intent to pledge the stock. Id. at 580. Castle is distinguishable from the case at hand, because in that case there was a writing which manifested an intent to convey the stock certificates to the creditor.
The second case cited by the district court was Hess v. Paulo, 38 Hawaii 279 (1949). Hess involved a series of transactions. As relevant here, the court held that, in the first transaction, a finance company, as mortgagee, had a lien secured by the mortgagor's automobile. The mortgagee lent funds to the mortgagor in exchange for a bill of sale and an agreement of resale, conditioned upon the mortgagee's retention of title and right to take possession on default. The court gave effect to the parties' intent to create a mortgage. There was no mere negative covenant in the case. Indeed, the transaction had all of the earmarks of a classic mortgage. Id. at 288.
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