§708-873 Defrauding secured creditors. (1) A person commits the offense of defrauding secured creditors if the person destroys, removes, conceals, encumbers, transfers, or otherwise deals with property subject to a security interest with intent to hinder enforcement of that interest.

(2) Defrauding secured creditors is a misdemeanor. [L 1972, c 9, pt of §1; gen ch 1993]

COMMENTARY ON §708-873

The sections dealing with theft are framed in terms of appropriation of property of another; however, a security interest does not make the secured party an owner and the property, by reason of the security interest alone, is not the property of another.[1] It is necessary, therefore, to provide separate penalties for "debtors or conditional vendees who dispose of property subject to a security interest in ways that may prejudice the secured creditor."[2] The requisite culpability is intent to hinder enforcement of the security interest; innocent potential hindering of such interest, such as the temporary removal of a secured chattel from the County or State, ought not to be made subject to criminal sanctions.[3]

The penalty provided is a misdemeanor, regardless of the amount involved. This differs somewhat from the theft offenses. This difference reflects the fact that generally offenders against a secured interest "are less dangerously deviated from social norms than outright thieves who take property to which they have no claim."[4] Moreover, in those cases where the actor intended, at the time the actor undertook the security obligation, to violate the terms thereof, felony penalties will be available under the theft provisions.[5]

Previous Hawaii law provided many offenses relating to defrauding secured creditors. These different offenses distinguished between the kind of property involved, i.e., whether real or personal,[6] between the mode of fraud, e.g., whether the property is concealed or sold,[7] and the type of security arrangement involved, e.g., whether a mortgage of personal property or a conditional sale.8 The exact reason for these various provisions, sometimes with different penalties, seems unclear. The Code provides a single unified offense with a single penalty for conduct which ought to be regarded by the penal law as presenting substantially the same type of social harm.

__________

§708-873 Commentary:

1. §708-800.

2. M.P.C., Tentative Draft No. 11, comments at 98 (1960).

3. Id. at 99.

4. Id. It should also be noted that the circumstances which warrant the formulation of a petty misdemeanor theft offense seem generally absent in defrauding secured creditors.

5. §§708-830 to 833.

6. Compare H.R.S. §745-1 with H.R.S. §745-2.

7. Compare H.R.S. §745-2 with H.R.S. §745-3.

8. Compare H.R.S. §745-3 with H.R.S. §745-7.