Sung v. Hamilton et al
ORDER: (1) GRANTING IN PART AND DENYING IN PART DEFENDANTS ROBERT EMMETT HAMILTON, SUSAN WEINERT HAMILTON, AND HULA BROTHERS, INC.'S MOTION FOR SUMMARY JUDGMENT AS TO PLAINTIFF SHIKWAN SUNG'S REMAINING CLAIMS 59 ; (2) GRANTING DEFENDANTS R OBERT EMMETT HAMILTON AND SUSAN WEINERT HAMILTON'S MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO COUNTERCLAIM 61 ; AND (3) GRANTING DEFENDANTS BIG ISLAND LAND CO., LTD., AND GREGORY GADD'S MOTION FOR SUMMARY JUDGMENT 83 . Signed by JUDGE DAV ID ALAN EZRA on 4/30/2010. (afc)CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF).
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII SHIKWAN SUNG, Plaintiff, vs. ROBERT EMMETT HAMILTON and SUSAN WEINERT HAMILTON, each individually and as Trustee under The Hamilton Joint Revocable Trust dated March 7, 1991; HULA BROTHERS, INC., a Hawai`i corporation; GREGORY GADD; TITLE GUARANTY ESCROW SERVICES, INC., a Hawaii corporation; JOHN DOES 110; JANE DOES 1-10; DOE PARTNERSHIPS 1-10; DOE CORPORATIONS 1-10; DOE ENTITIES 1-10; AND DOE GOVERNMENTAL AGENCIES 110, Defendants. _____________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) CV. NO. 09-00212 DAE-KSC
ORDER: (1) GRANTING IN PART AND DENYING IN PART DEFENDANTS ROBERT EMMETT HAMILTON, SUSAN WEINERT HAMILTON, AND HULA BROTHERS, INC.'S MOTION FOR SUMMARY JUDGMENT AS TO PLAINTIFF SHIKWAN SUNG'S REMAINING CLAIMS; (2) GRANTING DEFENDANTS ROBERT EMMETT HAMILTON AND SUSAN WEINERT HAMILTON'S MOTION FOR PARTIAL SUMMARY JUDGMENT AS TO COUNTERCLAIM; AND (3) GRANTING DEFENDANTS BIG ISLAND LAND CO., LTD., AND GREGORY GADD'S MOTION FOR SUMMARY JUDGMENT Pursuant to Local Rule 7.2(d), the Court finds this matter suitable for disposition without a hearing. After reviewing Defendants' motions and the supporting and opposing memoranda, the Court: GRANTS IN PART AND DENIES IN PART Defendants Robert Emmett Hamilton, Susan Weinert Hamilton, and Hula Brothers, Inc.'s Motion for Summary Judgment as to Plaintiff Shikwan Sung's Remaining Claims (Doc. # 59); GRANTS Defendants Robert Emmett Hamilton and Susan Weinert Hamilton's Motion for Partial Summary Judgment as to Counterclaim (Doc. # 61); and GRANTS Defendants Big Island Land Co., Ltd., and Gregory Gadd's Motion for Summary Judgment (Doc. # 83). BACKGROUND Many of the facts of this case have been described in a previous order by this Court. (See "Order," Doc. # 54.) Accordingly, this Court repeats the background facts only as is necessary to the Court's decision on the motions for
summary judgment and partial summary judgment in the discussion section below. The essential facts of this case are not in dispute. Defendants Robert Emmett Hamilton and Susan Weinert Hamilton (the "Hamiltons") are trustees under The Hamilton Joint Revocable Trust dated March 7, 1991 ("Hamilton Trust"). (Order at 2.) As of February 2008, the Hamiltons as trustees of the Hamilton Trust (the "Trustees") owned about 31.174 acres of land identified as Lot 33-B-2 of Land Court Application 1053 (amended), Keaau, District of Puna, Hawai`i, (TMK  1-6-003:104) and an appurtenant 7,500 square foot warehouse and fruit orchard (together, the "Property"). (Id. at 23.) Defendant Hula Brothers, Inc. ("Hula Brothers"), is a fruit packing business on the Property owned and operated by the Hamiltons.1 (Id. at 3.) The Hamiltons negotiated with Shikwan Sung ("Plaintiff" or "Sung") for purchase of the property and the assets of Hula Brothers. The negotiations involved the consideration of multiple agreements, including: an "Agreement for Keaau Property (TMK  1-6-003-0104) which provided Plaintiff an option to purchase the Property (the "Property Option") for $2.9 million, (Compl. ¶ 12; MPSJ, Ex. A at 1) and an "Agreement for Hula Brothers, Inc. Assets" (the "Asset
In this Order, the Court will refer to the Hamiltons and Hula Brothers together collectively as the "Hamilton Defendants." 3
Option"), which provided Plaintiff with an option for the purchase of Hula Brothers' assets, including a forklift, for $100,000 (MPSJ, Ex. B at 3, ¶ 1.2(a); Compl. ¶ 12; MPSJ, Ex. A ¶ 3.4.; MPSJ, Ex. B). On May 12, 2009, Plaintiff filed a Complaint for declaratory judgment (Count I), breach of contract and anticipatory breach (Count II), rescission (Count III), and unjust enrichment (Count IV) against the Hamilton Defendants. ("Compl." at 15-17, ¶¶ 52-63, Doc. # 1.) Additionally, Plaintiff alleged conversion (Count V) against the Hamiltons and TGES (Id. at 18, ¶¶ 64-69); misrepresentation (Count VI) and fraudulent misrepresentation (Count VII) against Robert Hamilton, Hula Brothers, Gregory Gadd ("Gadd") and the Big Island Land Co., Ltd., ("BILC") (Id. at 18-21, ¶¶ 70-80); fraudulent concealment (Count VIII) and negligent and intentional interference with contract and prospective advantage (Count IX) against the Hamilton Defendants, Gadd and BILC (Id. at 21-23, ¶¶ 8189); a declaratory judgment (Count X) and breach of contract (Count XI) against TGES (Id. at 23-4, ¶¶ 90-95); and breach of implied covenant of good faith and fair dealing (Count XII), HRS Chapter 480 - unfair or deceptive acts or practices (Count XIII), negligence (Count XIV), conspiracy (Count XV), and punitive damages (Count XVI) against all defendants (Id. at 24-27, ¶¶ 96-112.).
On June 2, 2009, TGES filed a cross-claim against the Hamilton Defendants, Gregory Gadd and BILC alleging non-liability and requesting indemnification, escrow costs, costs of suit and attorneys' fees, inter alia. ("Crossclaim," Doc. # 11.) On June 17, 2009, the Hamilton Defendants counterclaimed against Plaintiff alleging Plaintiff caused damage to the Property, that the Hamiltons are entitled to retain the $20,000.00 lease amount paid by Plaintiff, and that the monies held in escrow by TGES be applied toward these amounts. ("Counterclaim" at 7, Doc. # 12.) On August 20, 2009, Plaintiff filed a Motion for Partial Summary Judgment on Counts I, III, V, and X of Plaintiff's Complaint. (Doc. # 30.) On December 22, 2009, after a hearing on the Plaintiff's Motion, the Court issued an Order Granting in Part and Denying in Part Plaintiff's Motion for Partial Summary Judgment. (See Order, Doc. # 54.) On February 3, 2010, the Hamilton Defendants filed a Motion for Summary Judgment as to Plaintiff's remaining claims. ("MSJ," Doc. # 59.) On the same day, the Hamiltons filed a Motion for Partial Summary Judgment as to their Counterclaim. ("MPSJ," Doc. # 61.) On March 4, 2010, Defendants BILC and Gadd filed a Motion for Summary Judgment. ("BILC/Gadd MSJ," Doc. # 83.) On March 29, 2010, BILC and Gadd filed statements of no opposition as to the 5
Hamilton MPSJ and MSJ. (respectively, Docs. ## 101, 102.) Also on March 29, 2010, Plaintiff filed an opposition to the BILC/Gadd MSJ ("Opp'n to BILC/Gadd MSJ," Doc. # 103), the Hamilton MPSJ ("Opp'n to MPSJ," Doc. # 105), and the Hamilton MSJ. ("Opp'n to MSJ," Doc. # 106.) On April 5, 2010, BILC and Gadd filed its Reply in support of the BILC/Gadd MSJ. ("Reply to BILC/Gadd MSJ," Doc. # 115.) On the same day, the Hamilton Defendants filed their reply to the Hamilton MPSJ ("Reply to MPSJ," Doc. # 117), and the Hamiltons filed their reply to the Hamilton MSJ ("Reply to MSJ," Doc. # 116.). STANDARD OF REVIEW Rule 56 requires summary judgment to be granted when "the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c); see also Porter v. Cal. Dep't of Corr., 419 F.3d 885, 891 (9th Cir. 2005); Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000). A main purpose of summary judgment is to dispose of factually unsupported claims and defenses. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Summary judgment must be granted against a party that fails to demonstrate facts to establish what will be an essential element at trial. See id. at 6
323. The burden initially falls upon the moving party to identify for the court those "portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact." T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir. 1987) (citing Celotex Corp., 477 U.S. at 323). Once the moving party has carried its burden under Rule 56, the nonmoving party "must set forth specific facts showing that there is a genuine issue for trial" and may not rely on the mere allegations in the pleadings. Porter, 419 F.3d at 891 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986)). If the nonmoving party produces direct evidence of a material fact, the court may not assess the credibility of this evidence nor weigh against it any conflicting evidence presented by the moving party. T.W. Electrical Service, 809 F.2d at 632. DISCUSSION The instant action was filed in the District of Hawaii pursuant to 28 U.S.C. § 1332, diversity jurisdiction. Therefore, this Court is required to look to the substantive law of Hawai`i. Erie R.R. v. Tompkins, 304 U.S. 64 (1938). Sales of land are governed by the law of the state within which it is located. In re Grayco Land Escrow, Ltd., 559 P.2d 264, 274 (Haw. 1977). In the absence of controlling state law, a "federal court sitting in diversity must use its own best 7
judgment in predicting how the state's highest court would decide the case." Takahashi v. Loomis Armored Car Serv., 625 F.2d 314, 316 (9th Cir. 1980). "In so doing, a federal court may be aided by looking to well-reasoned decisions from other jurisdictions." Id. The Court shall address all of the motions together according to the remaining counts below. In the interests of clarity, the Court first summarizes the counts contained in Plaintiff's Complaint that are not directly moved on in the instant motions. I. Count II: Breach of Contract, Anticipatory Breach; Count III: recession of the DROA; Count X: Declaratory Relief; and Count XI: Breach of Contract Count II was plead as an alternative to Count I. Because this Court found there was no valid contract for sale of the Property, no contract is in existence to support Plaintiff's claim for breach of contract under Count II. (See Compl. ¶ 55 ("In the alternative, if the Court were to find the existence of a valid and enforceable contract, the Hamiltons and Hula Brothers have materially breached, or anticipatorily breached, such contract.").) As to Count III: recession of the DROA, Plaintiff's claim that he is entitled to recision of the lease agreement with the Hamiltons, this issue is necessarily addressed as part of Plaintiff's defense to the Hamilton's MPSJ on their counterclaim, infra Section XI. 8
Count X: Declaratory Relief and Count XI: Breach of Contract were plead only against defendant TGES. TGES is not involved in any of the motions addressed herein. II. Count IV: Unjust enrichment against the Hamilton Defendants The Court will discuss Plaintiff's claim for unjust enrichment together with the Hamilton Defendants' MPSJ on Count III of their Counterclaim. See infra Section XI. III. Count V: Conversion against the Hamiltons and TGES In their instant MSJ, Hamilton Defendants seek summary judgment on Plaintiff's claim of conversion. The common law tort claim of conversion involves "wrongful dominion over the property of another." Matsuda v. Wada, 101 F. Supp. 2d 1315, 1321 (D. Haw. 1999) (citing Tsuru v. Bayer, 25 Haw. 693, *2 (Haw. Terr. 1920)); see also Bank of N.Y. v. Fremont Gen. Corp., 523 F.3d 902, 914 (9th Cir. 2008) (stating that "to establish conversion, a plaintiff must show (1) his ownership of or right to possess the property at the time of the conversion, (2) that the defendant disposed of the plaintiff's property rights or converted the property by a wrongful act, and (3) damages."). In Tsuru, the Supreme Court of Hawai`i defined the tort of conversion as
[a]ny distinct act of dominion wrongfully exerted over one's property in denial of his right, or inconsistent with it, is a conversion. . . . While therefore it is a conversion where one takes the plaintiff's property and sells or otherwise disposes of it, it is equally a conversion if he takes it for a temporary purpose only, if in disregard of the plaintiff's right. . . . The word "conversion" by a long course of practice has acquired a technical meaning. It means detaining goods so as to deprive the person entitled to the possession of his dominion over them. . . . Conversion is any distinct act of dominion wrongfully exerted over another's personal property in denial of or inconsistent with his rights therein[.] Tsuru, 25 Haw. 693, 1920 WL 830 at *2. The Tsuru court stated the elements of conversion as: "(1) A taking from the owner without his consent; (2) an unwarranted assumption of ownership; (3) an illegal use or abuse of the chattel; and (4) a wrongful detention after demand." The Restatement (Second) of Torts defines conversion similarly. See Restatement (Second) of Torts § 222A; see also Pourney v. Maui Police Dept., County of Maui, 127 F. Supp. 2d 1129, 1146 (D. Haw. 2000). The Tsuru court further explained that "[c]onversion may be proved by demand and refusal of possession but evidence of this is not necessary if there is other evidence of actual conversion."2 Id. (quotation omitted). Demand and
The Tsuru court explained: "In actions of trover the general rule recognized by all the authorities is that where the original taking is lawful and there has been no illegal assumption of ownership or illegal user a demand and refusal must be shown as evidence of a disposition to convert to the holder's own use or to divest (continued...) 10
refusal of possession is the factual context involved in the instant case. See Pourney, 127 F. Supp. 2d at 1146. Plaintiff argues that because there was no contractual basis for the deposit of his $280,000, i.e., the Purchase Option was never exercised, he had a right to immediate possession of his funds in escrow. (Opp'n to MSJ at 25.) Plaintiff further asserts that the funds were withheld from him for ten months and that, consistent with what is required by case law, he demanded return of the funds and was refused possession by the Hamilton Defendants. (Opp'n to MSJ at 25; Doc. # 108, Exs. S & T.) Hamilton Defendants argue that they are entitled to summary judgment as a matter of law because they were justified in detaining the escrow funds in good faith, as there was a reasonable dispute as to the ownership of the funds. (MSJ at 5-6.) In support of their position of good faith, Hamilton Defendants rely on cases out of Texas, Nebraska, and Colorado. See e.g., Edmunds v. Sanders, 2 S.W. 3d 697, 704 (Tex. App. 1999) (providing that "refusal to deliver property on request may be justified in order to investigate the rights of the parties, and no
(...continued) the true owner of his property." Tsuru, 25 Haw. 693, 1920 WL 830 at *2 (defining trover as the name of the action which lay at common law for the recovery of damages for the conversion of personal property). 11
conversion results if such refusal is in good faith to resolve a doubtful matter."); Zimmerman v. FirsTier Bank, N.A., 585 N.W. 2d 445, 453 (Neb. 1998) (under Nebraska common law, in the context of the actions of a third party bank, "a bona fide reasonable detention of property by one who has assumed some duty respecting it, for the purpose of ascertaining its true ownership, or of determining the right of the demandant to receive it, will not sustain an action for conversion.") (citation omitted); Obodov v. Foster, 97 P.2d 426, 428 (Colo. 1939) (stating in the context of a receivership, "[w]hen refusals are not absolute, but are qualified by certain conditions which are reasonable, and which are imposed in good faith and in recognition of the rights of plaintiff, such refusals are an insufficient basis for an action in conversion.").3 Tsuru and the Hawai`i Supreme Court interpret conversion as an intentional tort requiring proof of "a constructive or actual intent to injure" in order Applying state law from Nevada and California, courts in the Ninth Circuit have held differently. See Bailey v. County of San Joaquin, 671 F. Supp. 2d 1167, 1178 (E.D. Cal. 2009) (stating that under California law, conversion is a strict liability tort, whereby the foundation of the action rests neither in the knowledge nor the intent of the defendant; "[s]pecifically, a defendant can be liable for conversion even where he acted in good faith, lacked knowledge of the conversion, or lacked motive to commit the tort." (citations omitted)); In re Ormsby, 591 F.3d 1199, 1205-1206 (9th Cir. 2010) (stating that under Nevada law "conversion is an act of general intent, which does not require wrongful intent and is not excused by care, good faith, or lack of knowledge.") (citation omitted)). This case law is not consistent with Hawai`i case law on conversion. See Brooks v. Dana Nance & Co., 153 P.3d 1091, 1100 (Haw. 2007). 12
to find liability. See Brooks v. Dana Nance & Co., 153 P.3d 1091, 1100 (Haw. 2007) (citing Iddings v. Mee-Lee, 919 P.2d 263, 271 (Haw. 1996) ("the commission of an intentional tort includes a constructive or actual intent to injure") (quoting Pleasant v. Johnson, 325 S.E.2d 244, 249 (N.C. 1985))); see also Pac. Mill Co. v. Enter. Mill Co., 16 Haw. 282, 284, 286 (1904) (approving a jury instruction that "conversion is the exercise of dominion over an article with intent to repudiate the ownership of the true owner and in defiance of his rights")). Pursuant to this Court's previous Order, no genuine issue of material fact exists as to whether Hamilton Defendants asserted wrongful dominion over the $280,000 escrow funds. However, there remains a genuine issue of material fact as to whether the Hamilton Defendants possessed "a constructive or actual intent to injure." See Brooks, 153 P.3d at 1100. Hamilton Defendants assert that a reasonable dispute as to the ownership of the funds existed and that this dispute negated any bad faith on their part. Similarly, the Hamilton Defendants state that they only withheld the funds subject to the condition that any real estate commission owed be taken care of, the escrow costs covered or waived, the well be properly shut down, and all claims and rights of Sellers and Buyer be terminated and that such actions were not in bad faith. (Doc. # 60, Ex. 4 at 3.) Whether such
actions negated any constructive or actual intent to injure Plaintiff is an issue of fact. While it is clear now that Plaintiff had a right to the $280,000 escrow funds because the Purchase Option was not executed, it remains in dispute whether at the time of Plaintiff's demand, the Hamilton Defendants wrongfully detained the funds in bad faith and would thereby be liable to Plaintiff.4 Accordingly, the Court DENIES Hamilton Defendants' Motion for Summary Judgment as to Count V. IV. Counts VI-VII: Misrepresentation and fraudulent misrepresentation against Robert Hamilton, Hula Brothers, Gadd and BILC, and Count VIII: Fraudulent concealment against the Hamilton Defendants, Gadd and BILC Count VI of the Complaint alleges misrepresentation against the Hamilton Defendants, Gadd and BILC (Compl. ¶¶ 70-74) due to their failure to notify Plaintiff that the Hamiltons had not signed the Asset Option (Opp'n to MSJ at 20.) Similarly, Count VII alleges fraudulent misrepresentation based upon the Pursuant to the Court's previous Order (See Order, Doc. # 54), the $280,000 escrow funds, subject to Plaintiff's stipulation to hold back $26,000, were returned to Plaintiff. Under Hawai`i law, "[i]f the plaintiff has accepted the return of the property this would not bar an action for conversion but would mitigate the damages and fix the measure thereof at the reasonable value of the property at the time of the conversion less its value when returned." Tsuru v. Bayer, 25 Haw. 693, 1920 WL 830, *3 (1920); see also Larsen v. Pacesetter Systems, Inc., 837 P.2d 1273, 1296-97 (Haw. 1992) (affirming that interest is compensatory in nature, and is properly given to a plaintiff "from the date of conversion of his property by defendant until the date judgment is satisfied[.]") (citing Lucas v. Liggett & Myers Tobacco Co., 461 P.2d 140, 141 (Haw. 1969)).
same factual allegations. (Compl. ¶¶ 75-80; Opp'n to MSJ at 18-20.) In Count VIII of the Complaint, Plaintiff alleges fraudulent concealment against the Hamilton Defendants, Gadd, and BILC based upon the same factual allegations and an additional allegation that Susan Hamilton executed the Plaintiff's DROA past the deadline to do so.5 (Compl. ¶¶ 81-87) Plaintiff's claim for fraudulent concealment is closely related to his claim for fraudulent misrepresentation. Intentional (or fraudulent) and negligent misrepresentation6 both require the misinformed party to demonstrate reliance on the alleged misrepresentation. Under Hawai`i law, the elements of intentional, or fraudulent, misrepresentation are: "(1) false representations were made by defendants[;] (2) with knowledge of their falsity (or without knowledge of their truth or falsity) [;] (3) in contemplation of plaintiff's reliance upon these false representations[;] and
Any allegation regarding Susan Hamilton's alleged failure to timely execute Plaintiff's DROA goes to the existence of a contract for the purchase of the Property and is moot due to this Court's finding that no contract for the purchase of the Property existed. (See Order.) 6 Plaintiff alleges general misrepresentation in Count VI and separately alleges fraudulent misrepresentation in Count VII. This Court construes Count VI to be a claim for negligent misrepresentation and Count VII to include intentional and fraudulent misrepresentation. Hawai`i courts recognize that "intentional" misrepresentation is the same cause of action as "fraudulent" misrepresentation. See Ass'n of Apartment Owners of Newtown Meadows ex rel. its Bd. of Dirs. v. Venture 15, Inc., 115 Haw. 232, 263 (2007) (characterizing "intentional or fraudulent misrepresentation" as comprising the same elements). 15
(4) plaintiff did rely upon them." Shoppe v. Gucci Am., Inc., 14 P.3d 1049, 1067 (Haw. 2000). Negligent misrepresentation, under Hawai`i law, requires that: "(1) false information be supplied as a result of the failure to exercise reasonable care or competence in communicating the information; (2) the person for whose benefit the information is supplied suffered the loss; and (3) the recipient relies upon the misrepresentation." Blair v. Ing, 21 P.3d 452, 474 (Haw. 2001) (citing Restatement (Second) of Torts § 552) (emphasis added). Plaintiff alleges the Hamilton Defendants, Gadd and BILC misrepresented (knowingly) that the Asset Option had been signed when, in fact, it had not been signed and Defendants should have known (or knew) that Plaintiff would reasonably rely on such misrepresentation. (Compl. ¶¶ 71-73, 76-78.) Plaintiff states that he relied on the alleged misrepresentation to his detriment by leasing the Property, drilling the well, and making other preparations for the development of the bottling facility. (Id. ¶ 79.) Hamilton Defendants argue that Plaintiff cannot assert a claim for misrepresentation because the Court has already determined that the Plaintiff never effectively exercised the Purchase Option or the Asset Option. (MSJ at 7.) The Court agrees. The Court finds that there is no genuine issue of material fact as to Plaintiff's reliance on the alleged misrepresentation. As a matter of law, Plaintiff cannot argue that he relied on the 16
Asset Option having been signed because he did not actually comply with the terms of the Asset Option. Plaintiff's argument is speculative as to what he would have done if not for the alleged misrepresentation. However, the law does not ask the Court to speculate, but instead requires the Court to look as if Plaintiff relied on the misrepresentation, and if so, if such reliance was to his detriment. Plaintiff did not rely on the Asset Option because he did not comply with its mandates. The Asset Option specifically required that it be exercised by 5:00 p.m. Hawai`i Standard time, September 15, 2008, or it expired and was of no further force or effect. (See Order at 18.) Plaintiff failed to timely or properly exercise the Property Option and did not even attempt to exercise the Asset Option. (See Order at 16-17, 18; Doc. # 107, Declaration of Shikwan Sung ¶¶ 19-21.) Plaintiff's assertions of reliance are incongruous with the record. Whether or not it was misrepresented to Plaintiff that the Hamiltons had signed the Asset Option, Plaintiff clearly failed to rely on the fact that he had a viable option due to his failure to even attempt to exercise such option. Therefore, any alleged misrepresentation did not affect Plaintiff's actions with regard to the Property or its purchase. As to Plaintiff's claim for fraudulent concealment, again, the elements of fraud under Hawai`i law include: (1) false representations made by the 17
defendant; (2) with knowledge of their falsity (or without knowledge of their truth or falsity); (3) in contemplation of plaintiff's reliance upon them; and (4) plaintiff's detrimental reliance. See Larsen v. Pacesetter Systems, Inc., 837 P.2d 1273, 1288 (Haw. 1992) (citation omitted); see also Associated Engineers & Contractors, Inc. v. State, 567 P.2d 397, 418 (Haw. 1977) ("Fraud in its generic sense, especially as the word is used in courts of equity, comprises all acts, omissions and concealments involving a breach of legal or equitable duty and resulting in damage to another.") "Fraud can be perpetrated by non-disclosure as well as by affirmative misrepresentation." Matsuda, 101 F. Supp. 2d at 1324. Under Hawai`i law, liability for fraudulent nondisclosure7 is governed by the Restatement (Second) of Torts § 551. See Elliot Megdal & Assocs. v. Hawaii Planing Mill, Ltd., 814 F. Supp. 898, 904 (D. Haw. 1993); see also Matsuda, 101 F. Supp. 2d at 1324 (citing Restatement (Second) of Torts § 551).) ; Molokoa Village Development Co., Ltd. v. Kauai Elec. Co., Ltd., 593 P.2d 375, 381 (Haw. 1979) (citing the Restatement (Second) of Torts § 551)). The Restatement (Second) of Torts § 551(1) provides:
In Hawai`i, a claim for fraudulent concealment is often plead in the context of actions taken by a liable party to conceal a known cause of action. See Au v. Au, 626 P.2d 173, 178 (Haw. 1981) (citing HRS § 657-20)). 18
One who fails to disclose to another a fact that he knows may justifiably induce the other to act or refrain from acting in a business transaction is subject to the same liability to the other as though he had represented the nonexistence of the matter that he has failed to disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose the matter in question. Id. Also, although it has not been cited by any Hawai`i court for the proposition, Restatement (Second) of Torts § 550 provides One party to a transaction who by concealment or other action intentionally prevents the other from acquiring material information is subject to the same liability to the other, for pecuniary loss as though he had stated the nonexistence of the matter that the other was thus prevented from discovering. Id. In the instant case, however, the Court need not address the elements Plaintiff's claim under either statement of the law because here, as above, there is no genuine issue of material fact as to reliance or causation that could result in damages. See Larsen, 837 P.2d at 1288; Associated Engineers & Contractors, 567 P.2d at 418. As discussed above, any nondisclosure or fraudulent concealment regarding whether the Asset Option was signed clearly did not cause Plaintiff to rely on the viability of the option because he failed to execute the Asset Option as described above. In other words, Plaintiff has not provided any evidence to suggest that his perception that the Asset Option had been signed impacted his failure to properly execute either the Purchase or Asset Option. Without having 19
executed the Asset Option and taking advantage of its provisions, Plaintiff cannot argue that he was relying on the existence of a viable option under that agreement. See Restatement (Second) Torts § 546 ("The maker of a fraudulent misrepresentation is subject to liability for pecuniary loss suffered by one who justifiably relies upon the truth of the matter misrepresented, if his reliance is a substantial factor in determining the course of conduct that results in his loss."). Accordingly, the Court GRANTS Hamilton Defendants' Motion for Summary Judgment as to Counts VI, VII, and VIII. The Court also GRANTS BILC/Gadd's Motion for Summary Judgment as to Counts VI, VII, and VIII. V. Count IX: Negligent and intentional interference with contract and prospective advantage against the Hamilton Defendants, Gadd and BILC In Count IX, Plaintiff alleges negligent and intentional interference with contract and prospective advantage against the Hamilton Defendants, Gadd, and BILC. (Compl. ¶¶ 88-89.) Plaintiff provides no authority to support a cause of action for "negligent" interference with contract or prospective business advantage, and the Court finds no cases in Hawai`i establishing such a cause of action. In the Restatement (Second) of Torts, the comments to "negligent interference with contract or prospective contractual relation" state that
[t]hus far there has been no general recognition of any liability for a negligent interference, whether it is interference with a third person's performance of his contract with the plaintiff (cf. § 766), with the plaintiff's performance of his own contract (cf. § 766A) or with the plaintiff's acquisition of prospective contractual relations. (Cf. § 766B). Restatement (Second) of Torts § 766C cmt. Specifically, the Restatement (Second) of Torts § 766C states: One is not liable to another for pecuniary harm not deriving from physical harm to the other, if that harm results from the actor's negligently (a) (b) (c) causing a third person not to perform a contract with the other, or interfering with the other's performance of his contract or making the performance more expensive or burdensome, or interfering with the other's acquiring a contractual relation with a third person.
Restatement (Second) of Torts § 766C. A plaintiff alleging the intentional tort of interference with prospective contractual relations must plead and prove the following: (1) a prospective contractual relationship existed between the plaintiff and a third party; (2) the defendant knew of this relationship; (3) the defendant intentionally interfered with the plaintiff's prospective contract; (4) the defendant acted without proper justification; (5) the defendant's interference caused the third party to fail to consummate the prospective contract with the plaintiff; and (6) the defendant's interference caused damages to the plaintiff
Kutcher v. Zimmerman, 957 P.2d 1076, 1088 (Haw. Ct. App. 1998). Under Count IX, Plaintiff also alleges interference with prospective business advantage. The elements of the intentional tort of tortious interference with prospective business advantage are: (1) the existence of a valid business relationship or a prospective advantage or expectancy sufficiently definite, specific, and capable of acceptance in the sense that there is a reasonable probability of it maturing into a future economic benefit to the plaintiff; (2) knowledge of the relationship, advantage, or expectancy by the defendant; (3) a purposeful intent to interfere with the relationship, advantage, or expectancy; (4) legal causation between the act of interference and the impairment of the relationship, advantage, or expectancy; and (5) actual damages. Hawaii Medical Ass'n v. Hawaii Medical Service Ass'n, Inc., 148 P.3d 1179, 1218 (Haw. 2006) (adopted from Restatement (Second) of Torts § 766B (1979)) (citations omitted). As to each of the causes of action above, the Court may rule as matter of law because there is no genuine issue of material fact as to causation or proper justification. The only evidence that Plaintiff puts forth is that in December 2008, Plaintiff notified his investors that the Hamiltons intended to renegotiate the terms of the Asset Option and that as a result of the uncertainty of the agreement, the investors were no longer interested in proceeding with the project. (Doc. # 106,
Declaration of Shikwan Sung ¶¶ 23-26 & Ex. T.) As noted above, in order to have timely executed the Property and Asset Options, each option had to have been properly executed by Plaintiff prior to 5:00 p.m. Hawai`i Standard time, September 15, 2008 or both options expired and were of no further force or effect. (See Order at 16, 18.) Plaintiff failed to timely exercise either option and this failure was prior to any attempt by the Hamiltons to renegotiate the Asset Option. (Id.; see also (Doc. # 106, Ex. T.) The Court's analysis as to Count IX is similar as to Plaintiff's claims of misrepresentation and concealment, Section IV, supra. Here, Plaintiff alleges that because the Hamilton Defendants did not sign the Asset Option, Plaintiff lost investors that would have subsequently acquired the Property from him. (See Opp'n to MSJ at 3, 26.) As explained above, Plaintiff did not properly or timely execute the Purchase or Asset Options. These failures were prior to any actions alleged by Plaintiff to have caused his loss of financing. (Doc. # 106, Declaration of Shikwan Sung ¶¶ 23-26 & Ex. T.) If Plaintiff believed, as he asserts, that the Asset Option was signed by the Hamiltons and effective, then his own failure to properly execute both options independently caused his investor contracts to fail and resulted in his loss of financing. (See Doc. # 106, Ex. T at 1 ("In the event HRWC [Plaintiff's business] does not acquire said property, and then this 23
agreement shall be Null and void."), 3 ("In the event HRWC does not acquire said property, then this agreement shall be null and void.").) The investor contract expressly provides that Plaintiff will use his best efforts to acquire the Property and the agreement became effective only when such Property was acquired; here, Plaintiff's own actions caused his purchase of the Property to fail. (See id.; Order at 16-17, 18.) Moreover, even had Hamilton Defendants signed the Asset Option, Plaintiff's failure to execute the Asset Option (or the Property Option) would have provided the Hamilton Defendants with cause to renegotiate its terms, which is the specific act alleged to have caused the loss of investors. Therefore, as a matter of law, the Hamiltons were justified in attempting to renegotiate the Asset Option. Accordingly, the Court GRANTS the Hamilton Defendants' Motion for Summary Judgment as to Count IX. The Court also GRANTS BILC/Gadd's Motion for Summary Judgment as to Count IX. VI. Count XII: Breach of implied covenant of good faith and fair dealing against all Defendants Hamilton Defendants, Gadd and BILC move for summary judgment on Count XII of Plaintiff's Complaint alleging breach of implied covenant of good faith and fair dealing. Hamilton Defendants argue that Count XII should be
dismissed because Plaintiff has failed to state a claim upon which relief can be granted. (MSJ at 10.) No opposition to Hamilton Defendants MSJ as to Count XII was filed by the Plaintiff. Hawai`i law recognizes that "every contract contains an implied covenant of good faith and fair dealing that neither party will do anything that will deprive the other of the benefits of the agreement." Best Place, Inc. v. Penn Am. Ins. Co., 920 P.2d 334, 337-38 (Haw. 1996) (citations omitted). However, Hawai`i courts have not recognized a separate tort cause of action for bad faith or breach of the duty of good faith and fair dealing based upon any type of contract in any circumstances. Moreover, in Francis v. Lee Enterprises, Inc., 971 P.2d 707, 71112 (Haw. 1999), the Hawai`i Supreme Court stressed the importance that claims of bad faith be limited to "the insurance context or situations involving special relationships characterized by elements of fiduciary responsibility, public interest, and adhesion." The Hawai`i Supreme Court stated that the limitation on the tort of bad faith was important due to the fact that recovery in tort was very different from contractual remedies. Id. at 712-13. Accordingly, the Hawai`i Supreme Court stated that Hawai` law will not allow a recovery in tort "in the absence of conduct that (1) violates a duty that is independently recognized by principles of tort law and (2) transcends the breach of the contract." Id. at 717. 25
It is unclear to the Court what Plaintiff is attempting to allege. Plaintiff's claim as to Count XII is vague and states only "[i]n all contracts, including the above-described agreement between Plaintiff and the Hamiltons, there is an implied covenant of good faith and fair dealing." (Compl. ¶ 97.) Plaintiff has not identified which contract, if any, gave rise to the alleged duty of good faith in relation to the Hamilton Defendants, nor has Plaintiff offered evidence that a special relationship existed between the himself and the Hamilton Defendants such that the tort of bad faith should extend to this context. Neither has Plaintiff explained which allegations show conduct that transcends breach of contract. Because Plaintiff offers no evidence in relation to this claim, there can be no genuine issue of material fact. The Court finds that Plaintiff has failed to state a claim upon which relief may be granted. As to BILC and Gadd, Plaintiff asserts that Gadd owed Plaintiff a duty of due care and violated this duty by failing to properly advise Plaintiff, and cites extensive out of state case law in support of this proposition. (See Opp'n to BILC/Gadd MSJ at 5-16.) The case law cited by Plaintiff relates to a duty of fairness and honesty imposed by out of state courts on real estate brokers to all parties in a real estate transaction--even those to whom they are not agents. (See id. at 5-9.) The facts in those cases involved buyers who "justifiably believe the 26
seller's broker is also protecting their interest . . . ." Nguyen v. Scott, 253 Cal. Rptr. 800, 806 (1988) (quotation omitted); see e.g. Ward v. Taggart, 336 P.2d 534 (Cal. 1959). In the instant case, BILC/Gadd represented the Hamiltons in the attempted sale of the Property and Sung, as a licensed broker in Hawaii, represented himself. (See Doc. # 60, Ex. 4 ¶ 2.3 (providing a four percent real estate commission to BILC and stating that "Sung is a licenced real estate broker in the State of Hawaii and represents the buyer in this transaction."); see also Doc. # 108 ¶ 4.) Plaintiff also previously held and currently holds a broker's license in California. (Doc. # 108 ¶ 4.) Again, it is unclear to the Court what Plaintiff is attempting to allege. His claim as to Count XII is vague and states only "[i]n all contracts, including the above-described agreement between Plaintiff and the Hamiltons, there is an implied covenant of good faith and fair dealing." (Compl. ¶ 97.) Plaintiff's opposition to the BILC/Gadd MSJ also makes factual allegations, including the alleged misrepresentations regarding the Asset Option described above, but fails to allege how Plaintiff was harmed by this conduct, except to infer that it was BILC/Gadd's duty to have provided Plaintiff with the Notice of Intent to exercise the Asset Option. (See Opp'n to BILC/Gadd MSJ at 10-16.) The Court finds that even if BILC/Gadd owed Plaintiff a duty of good faith and were required to 27
disclose material facts and not disseminate false information, Plaintiff cites to no factual allegations, duty or legal or contractual obligation that would have required BILC/Gadd to have provided Plaintiff with the Notice of Intent to exercise the Asset Option, especially not in the context of a claim for breach of an implied covenant of good faith and fair dealing. Plaintiff, as his own representative licensed in Hawaii, had an obligation to himself to obtain all necessary documentation and properly execute all contracts. Moreover, BILC/Gadd stood to profit only if the sale closed (Doc. # 60, Ex. 4 ¶ 2.3), and Plaintiff offers no evidence to contradict their assertion and the supporting evidence that they had every incentive to facilitate closing on the deal, not to hinder Plaintiff's acceptance. It appears to the Court that Count XII is a restatement of his claim for misrepresentation, as addressed by the Court above. (See Opp'n to BILC/Gadd MSJ at 10-16.) Whether or not Plaintiff was justified on relying on Gadd, he did not act in reliance on Gadd's alleged misrepresentations that the Asset Option had been signed because Plaintiff never attempted to execute the option. Further, Plaintiff's allegations against BILC/Gadd regarding their alleged failure to meet their duty to provide copies of documents to all parties, failure to carefully draft the DROA, failure to properly supervise office staff, and failure to adequately disclose agency relationships are not properly alleged in 28
Count XII and, even assuming the existence of a special relationship, does not violate a duty that is independently recognized by principles of tort law or transcend breach of the contract. Accordingly, the Court GRANTS Hamilton Defendants' Motion for Summary Judgment as to Count XII. The Court also GRANTS BILC/Gadd's Motion for Summary as to Count XII. VII. Count XIII: HRS Chapter 480 - unfair or deceptive acts or practices claim against all Defendants Defendants argue that Plaintiff is precluded from bringing suit for unfair or deceptive acts or practices pursuant to HRS Chapter 480 because Plaintiff does not qualify was a "consumer" under the Chapter. HRS § 480-2 provides in relevant part: (a) Unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce are unlawful. .... (d) No person other than a consumer, the attorney general or the director of the office of consumer protection may bring an action based upon unfair or deceptive acts or practices declared unlawful by this section. HRS § 480-1 defines "consumer" as "a natural person who, primarily for personal, family, or household purposes, purchases, attempts to purchase, or is solicited to
purchase goods or services or who commits money, property, or services in a personal investment." To support their arguments, the Hamilton Defendants and Plaintiff rely on the same Hawai`i case. In Cieri v. Leticia Query Realty, Inc., 905 P.2d 29 (Haw. 1995), the Supreme Court of Hawai`i held that: [R]eal estate may be purchased with an intent to reside on the parcel of property and, concurrently, with an intent to hold the property in anticipation of an appreciation in the parcel's resale value. Accordingly, absent legislative intent to the contrary, we believe the plain and obvious meaning of the term "personal investment" includes real estate or residences. Id. at 42 (emphasis added). Plaintiff seeks to characterize this language as meaning any real estate purchase by an individual constitutes a "personal investment." The Court is not inclined to extend the holding of Cieri so broadly. The situation confronted by the court in Cieri was whether the purchase of a home constituted a personal investment. Plaintiff presents no case law to support his proposition that the definition of a personal investment primarily for personal, family, or household purposes be extended to include real estate purchased with the intent to develop and operate as a business. Chapter 480 was specifically designed to protect individual consumers rather than businesses. See Joy A. McElroy, M.D., Inc. v. Maryl Group, Inc., 114 30
P.3d 929, 942 (Haw. Ct. App. 2005) (referencing a Hawai`i legislature standing committee report and noting that the report "clearly evinced the legislature's intent that the provision be used to protect individual consumers rather than businesses."). Although Plaintiff commenced his purchase of the Property as an individual, his purchase of the Property was for developing and operating a bottling business, namely Hawaiian Rain Forest Water Co., LLC, and Plaintiff even procured investment financing to do so and negotiated sale of his completed business for six million dollars. (Doc. # 108, Ex. B; Compl. ¶ 24 ("Plaintiff proceeded to take substantial actions to prepare for the beverage production and bottling business he indented to undertake on the Property, including, but not limited to: (a) arranging for financing; (b) hiring experts and consultants to assist with obtaining a County special permit to allow commercial water bottling and beverage facility on a portion of the Land; (c) applying for and obtaining a well permit from the State Commission on Water Resource Management to drill a well to provide potable water for the beverage production; (d) hiring a well driller to assist with the location and drilling of the well; (e) applying for and obtaining an individual wastewater system permit through the State of Hawai`i Department of Health; (f) applying for a loan guaranty from the U.S. Department of Agriculture; (g) enrolling in the Enterprise Zones Partnership Program under the State of 31
Hawai`i Department of Business Economic Development & Tourism; and (h) making frequent trips to Hawai1i to participate in and oversee the progress of these efforts. . . . Plaintiff, to said Defendants' express knowledge, also obtained investors to finance the transaction."); Opp'n to MSJ at 3 ("Sung had an agreement with the investor/partners that if he succeeded with the venture, they would purchase the completed enterprise from him for $6 million." (citing Doc. # 108, Sung Declaration ¶ 9.).) Plaintiff acted as a business in regards to his purchase of the Property and signed contracts which regarded Plaintiff and Plaintiff's relation to the Property as a business. (See Doc. # 108, Ex. B; Reply to MPSJ, Ex. 6.) The instant case is clearly distinguished from a situation under Chapter 480 in which a natural person invests in a business venture and is provided protection from unfair or deceptive acts or practices. See Cieri, 905 P.2d at 42 (citing the relevant legislative history of section 480-1). Here, Plaintiff was creating his own venture and his investors were relying on his business to provide them with profit. Moreover, in addition to being the purchaser, Plaintiff also acted as his own broker in the transaction. (See Doc. # 60, Ex. 4 ¶ 2.3 (providing a four percent real estate commission to BILC and stating that "Sung is a licenced real estate broker in the State of Hawaii and represents the buyer in this transaction.") 32
Additionally, the Court notes that Plaintiff has failed to identify any unfair or deceptive practices attributable to any defendant and on this basis has failed to meet the required pleading requirements. See Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007); Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). For all the reasons above, Plaintiff's investment was for business purposes, not for personal, family, or household purposes. Therefore, Court finds that Plaintiff's bottling business, for which he sought out and acquired investors, does not constitute a "personal investment" within the meaning of Chapter 480. As such, Plaintiff does not satisfy the definition of a "consumer" and may not bring a cause of action under HRS Chapter 480-2. Accordingly, the Court GRANTS the Hamilton Defendants' Motion for Summary Judgment as to Count XIII. The Court also GRANTS BILC/Gadd's Motion for Summary Judgment as to Count XIII. VIII. Count XIV: Negligence against all Defendants Hamilton Defendants, BILC, and Gadd also move for summary judgment on Count XIV, Plaintiff's claim of negligence against all Defendants. The Hamilton Defendants argue that Plaintiff has not met his pleading burden pursuant to Federal Rule of Civil Procedure 12(b)(6). (MSJ at 12.) Consequently, Hamilton Defendants argue that, as a matter of law, Plaintiff's negligence claim 33
should be dismissed for failure to state a claim upon which relief can be granted because the Complaint fails to explain how the Hamiltons were negligent or how Plaintiff was damaged. (Id.) No opposition to Count XIV was filed by Plaintiff. Pursuant to Fed. R. Civ. P. 12(b)(6), a motion to dismiss will be granted where the plaintiff fails to state a claim upon which relief can be granted. Review is limited to the contents of the complaint. See Clegg v. Cult Awareness Network, 18 F.3d 752, 754 (9th Cir. 1994). Allegations of fact in the complaint must be taken as true and construed in the light most favorable to the plaintiff. See Zucco Partners, LLC v. Digimarc Corp., 552 F.3d 981, 989 (9th Cir. 2009); Livid Holdings Ltd. v. Salomon Smith Barney, Inc., 416 F.3d 940, 946 (9th Cir. 2005). A complaint need not include detailed facts to survive a Rule 12(b)(6) motion to dismiss. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). In providing grounds for relief, however, a plaintiff must do more than recite the formulaic elements of a cause of action. See id.; Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). A plaintiff must include enough facts to raise a reasonable expectation that discovery will reveal evidence. In other words, a plaintiff must allege enough facts to state a claim for relief that is plausible on its face. See id. at 570. "[C]onclusory allegations without more are insufficient to defeat a motion to
dismiss for failure to state a claim." McGlinchy v. Shell Chem. Co., 845 F.2d 802, 810 (9th Cir. 1988). In the Complaint, Plaintiff asserts that the Hamilton Defendants' "aforesaid actions were negligent, careless and reckless and they "knew or should have known that their actions would result in harm to Plaintiff." (Compl. ¶ 103.) Plaintiff asserts this conclusory allegation without specific reference to which facts involving the Hamilton Defendants support this allegation, in what manner the Hamilton Defendants were negligent, or how Plaintiff was harmed by the Hamilton Defendants. Under Hawai`i law, the elements of a cause of action for negligence are: 1. A duty, or obligation, recognized by the law, requiring the defendant to conform to a certain standard of conduct, for the protection of others against unreasonable risks; 2. A failure on the defendant's part to conform to the standard required: a breach of the duty; 3. A reasonably close causal connection between the conduct and the resulting injury; and 4. Actual loss or damage resulting to the interests of another. Doe Parents No. 1 v. State Dep't of Educ., 58 P.3d 545, 579 (Haw. 2002) (citing (Dairy Road Partners v. Island Ins. Co., Ltd., 992 P.2d 93, 114 (Haw. 2000)).
"[I]t is fundamental that a negligence action lies only where there is a duty owed by the defendant to the plaintiff." Bidar v. Amfac, Inc., 669 P.2d 154, 158 (Haw. 1983). A duty "`is owed only to those who are foreseeably8 endangered by the conduct and only with respect to those risks or hazards whose likelihood made the conduct unreasonably dangerous.'" Doe Parents No. 1, 58 P.3d at 583 (citation omitted) (emphasis added). The test of foreseeability with respect to a duty is "`whether there is some probability of harm sufficiently serious that a reasonable and prudent person would take precautions to avoid it.' . . . The aforementioned test `does not mean foreseeability of any harm whatsoever, and it is not sufficient that injury is merely possible.'" Pulawa v. GTE Hawaiian Tel, 143 P.3d 1205, 1219 (Haw. 2006) (citations omitted) (emphasis added). Generally, "`[t]o recover in negligence[,] there must be a showing of harm above and beyond disappointed expectations. A buyer's desire to enjoy the benefit of his bargain is not an interest that tort law traditionally protects.'" Ass'n of Apartment Owners of Newtown Meadows v. Venture 15, Inc., 167 P.3d 225,
"[T]he issue of foreseeability in the context of duty is a question of law for the court to resolve . . . ." Pulawa v. GTE Hawaiian Tel, 143 P.3d 1205, 1216 (Haw. 2006). 36
282 (Haw. 2007) (quoting Redarowicz v. Ohlendorf, 441 N.E.2d 324, 327 (Ill. 1982)) (second set of brackets in original) (emphasis added).9 Plaintiff's vague allegations fail to state a claim of negligence against the Hamilton Defendants that may be discerned by this Court. Moreover, Plaintiff separately claimed negligent misrepresentation as addressed above. As to BILC/Gadd, Plaintiff alleges: "Gadd/BILC are licensed under Hawaii law and have negligently violated Hawaii Administrative Rules § 16-99-3, including but not limited to, Gadd/BILC's duty to see that copies of all agreements are placed in the hands of all parties involved at the time they are executed." (Compl. ¶ 103.) These vague allegations fail to state a claim of negligence. Plaintiff does not allege actual loss, harm, or damage in accordance with BILC/Gadd's actions. Plaintiff In addition to the foreseeability of sufficiently serious harm, the court should consider the following factors: "whether a special relationship exists, . . . the degree of certainty that the injured party suffered injury, the closeness of the connection between the defendants' conduct and the injury suffered, the moral blame attached to the defendants, the policy of preventing harm, the extent of the burden to the defendants and consequences to the community of imposing a duty to exercise care with resulting liability for breach, and the availability, cost, and prevalence of insurance for the risk involved." Pulawa, 143 P.3d at 1214 (quoting Blair v. Ing, 21 P.3d 452, 464-65 (Haw. 2001)). 37
has failed to even recite the formulaic elements of a cause of action necessary to state a claim of negligence. Accordingly, the Court GRANTS Hamilton Defendants' Motion for Summary Judgment and Count XIV is hereby dismissed WITHOUT PREJUDICE as to the Hamilton Defendants. Similarly, the Court GRANTS BILC/Gadd's Motion for Summary Judgment on Count XIV and Count XIV is hereby dismissed WITHOUT PREJUDICE as to the BILC/Gadd. Plaintiff has until May 30, 2010, to file an Amended Complaint with this Court as to Count XIV. Any Amended Complaint must comply with the dictates of this Order and cure all deficiencies for Count XIV. IX. Count XV: Conspiracy against all Defendants The Hamilton Defendants also move for summary judgment on Count XV alleging conspiracy against all Defendants. "`[T]he accepted definition of a conspiracy is a combination of two or more persons [or entities] by concerted action to accomplish a criminal or unlawful purpose, or to accomplish some purpose not in itself criminal or unlawful by criminal or unlawful means.'" Robert's Haw. Sch. Bus, Inc. v. Laupahoehoe Transp. Co., Inc., 982 P.2d 853, 881 n.28 (Haw. 1999) (quoting Duplex Printing Press Co. v. Deering, 254 U.S. 443, 466 (1921)). The plaintiff must allege an 38
underlying actionable claim because "there can be no civil claim based upon a conspiracy alone . . . ." Weinberg v. Mauch, 890 P.2d 277, 286 (1995); See Ellis v. Crockett, 451 P.2d 814, 822-23 (1969). "A conspiracy is constituted by an agreement . . . No formal agreement between the parties is essential to the formation of the conspiracy, for the agreement may be shown `if there be concert of action, all the parties working together understandingly, with a single design for the accomplishment of a common purpose.'" Marino v. United States, 91 F.2d 691, 694 (9th Cir. 1937) (citation omitted); The existence of the joint assent of the parties need not be proved directly. Like any other ultimate fact, it may be found as an inference from facts proved. It is enough if the evidentiary facts and circumstances -- pieced together and considered as a whole -- convince the judicial mind that the parties united in an understanding way to accomplish the fraudulent scheme. Kazuo Hashimoto v. Halm, NO. 2847, 1953 WL 7576, at *5 (Haw. Terr. Nov. 20, 1953); State v. Yoshida, 361 P.2d 1032, 1042 (1961) ("[t]he existence of a conspiracy may be inferred from the circumstances."). Accordingly, determining whether a conspiracy exists involves multiple credibility and factual determinations.
The Hamilton Defendants, argue that they are entitled to summary judgment on the conspiracy claim because no actions of the Hamiltons alleged by Plaintiff are unlawful. However, as noted in Section III of this Order, genuine issues of material fact exist as to whether the Hamilton Defendants are liable to Plaintiff for conversion. As such, the Court cannot dispose of Plaintiff's conspiracy claim in the instant motion for summary judgment. There is, however, no genuine issue of material fact regarding the conspiracy claim against BILC/Gadd. Pursuant to this order, the Court has dismissed all of Plaintiff's claims against BILC/Gadd for any underlying actionable claim. (See supra Sections IV-IX.) Accordingly, the Court DENIES Hamilton Defendants' Motion for Summary Judgment as to Count XV. The Court GRANTS BILC/Gadd's Motion for Summary Judgment as to Count XV. X. Count XVI: Punitive damages against all Defendants Finally, the Hamilton Defendants, BILC, and Gadd move for summary judgment on Count XVI, which asserts a claim for punitive damages. A claim for punitive damages is not an independent tort, but a remedy that is incidental to another cause of action. See Ross v. Stouffer Hotel Co. (Hawai`I) Ltd., 879 P.2d 1037, 1049 (1994) (citing Kang v. Harrington, 587 P.2d 285, 291 40
(Haw. 1978) (holding that a claim for punitive damages "is not an independent tort, but is purely incidental to a separate cause of action"). The Court will construe Plaintiff's claim for punitive damages as a prayer for relief ancillary to his other causes of action. See S. Port Marine, LLC v. Gulf Oil Ltd. Partnership, 234 F.3d 58, 64 (1st Cir. 2000) ("Punitive damages . . . do not constitute a separate cause of action, but instead form a remedy available for some tortious or otherwise unlawful acts.") Due to the fact that a cause of action remains for conversion and conspiracy against the Hamilton Defendants, it is premature at this time for the Court to rule as to the availability of punitive damages. Ditto v. McCurdy, 947 P.2d 952, 959 (Haw. 1997) ("[O]ne circumstance in Hawai`i that warrants an award of punitive damages is when "there has been some wilful misconduct or that entire want of care which would raise presumption of a conscious indifference to consequences.") (citation and internal quotation marks omitted). As to BILC/Gadd, no underlying cause of action remains that would support a claim for punitive damages. Accordingly, the Court DENIES WITHOUT PREJUDICE Hamilton Defendants' Motion for Summary Judgment as to Count XVI. The Court GRANTS BILC/Gadd Motion's for Summary Judgment as to Count XVI. 41
Counterclaim Hamilton Defendants move for summary judgment on Counts I and
III of their Counterclaim against Plaintiff. A. Count I Count I alleges that Plaintiff breached the Property Option, and the Hamilton's are entitled to the costs incurred to fill in an unfinished well on the Property that was drilled by Plaintiff during his lease term. (MPSJ at 4-5.) Hamilton Defendants contend that pursuant to Section 8 of the Property Option, Plaintiff agreed to bear all costs associated with inspection and testing of the Property during his lease term. (Id. at 5.) In support, Hamilton Defendants quote Section 8 that provides that Plaintiff agrees to "indemnify and hold harmless the Hamiltons from any costs, expenses, claims or liability of any kind arising out of the inspection and testing, including property damage, personal injury or death." (Id.; Property Option ¶ 8.) Hamilton Defendants argue that consent to Plaintiff's inspecting and testing of the land by drilling a well was only granted pursuant to the Property Option. (Reply to MPSJ at 10.) Hamilton Defendants argue that in conducting his inspection pursuant to the Property Option, Plaintiff hired a contractor to begin drilling a well, which Plaintiff subsequently abandoned when negotiations regarding the Property fell apart. (Id.) As a result, Hamilton 43
Defendants argue they have incurred $26,041.50 in expenses in order to fill the well and Plaintiff has refused to pay these costs, contrary to his contractual obligation. (Id.) Plaintiff argues that the Property Option did not require Plaintiff to return the Property to its original condition. (Doc. # 105, ("Opp'n to MPSJ") at 5.) Citing authority from New Mexico, Kansas, and Louisiana, Plaintiff argues that in the absence of an express provision, a lessee is not obligated to restore the land to its pre-leased condition. (Id. at 6.) Plaintiff contends that the record does not support any finding of the parties' intent regarding a covenant to restore because the indemnification provision relates to inspection and testing and the drilling of a well for its use as part of a bottling operation is neither inspection nor testing. (Id. at 9-11.) Furthermore, Plaintiff argues that if such a covenant could be implied, it would be a question of fact and not properly entertained in a motion for summary judgment. (Id. at 9.) Moreover, Plaintiff maintains that the Hamilton Defendants expressly consented to Plaintiff's drilling of the well and thus are precluded from asserting a duty to restore. (Id.) Alternatively, Plaintiff argues that the well was an improvement to the Property and the expenses Defendants incurred to fill the well were unreasonable. (Id. at 10-11.) Plaintiff argues that a question of whether Hamilton Defendants were damaged by the well and the reasonableness of their 44
actions and expenses to fill the well are issues of fact not properly entertained in a motion for summary judgment. (Id.) The Court finds that Section 8 of the Property Option requires Plaintiff to indemnify Hamilton Defendants from all costs arising from Plaintiff's inspection and testing of the Property. Section 8 of the Property Option states: Upon the signing of this agreement by all parties, Sung shall be entitled to conduct such inspection and testing for the Property as he wishes upon reasonable advance notice to Hamiltons. All such inspection and testing shall be at the sole cost of Sung. Sung will indemnify and hold harmless Hamiltons from any costs, expenses, claims or liability of any kind (including reasonable attorneys' fees) arising out of the inspection and testing, including property damage, personal injury or death. . . . . It is well established that "the construction and legal effect to be given a contract is a question of law to be decided by the court." Reed & Martin, Inc. v. City & County of Honolulu, 440 P.2d 526, 527 (Haw. 1968) (citation omitted). In Hawai`i, "it is established that the court's function is to construe and enforce contracts made by the parties, not to make or alter them." Heatherly v. Hilton Hawaiian Village Joint Venture, 893 P.2d 779, 793 (Haw. 1995) (citation omitted). "Absent an ambiguity, contract terms should be interpreted according to their plain, ordinary, and accepted sense in common speech." Whether a contract is ambiguous is a question of law. Brown v. KFC Nat'l Management Co., 921 P.2d 45
146, 160 (Haw. 1996) (citation omitted). "Ambiguity exists only when the contract taken as a whole is reasonably subject to differing interpretation." County of Kaua`i v. Scottsdale Ins. Co., Inc., 978 P.2d 838, 844 (Haw. 1999) (citation omitted). The Court finds that Section 8 is not ambiguous. The language of the section clearly states that Sung will "indemnify and hold harmless Hamiltons from any costs, expenses, claims or liability of any kind (including reasonable attorneys' fees) arising out of the inspection and testing, including property damage . . . ." This is not an implied covenant, but an express provision of the contract agreed to by the parties. Plaintiff expressly agreed to indemnify the Hamiltons from any costs, expenses arising out of the inspection and testing, including property damage. "The general obligation of the lessee to repair and his covenants to do so are not to be enlarged beyond their fair intent, and the tenant should not be held responsible for any damages in case of injury or destruction not anticipated, contemplated or intended when the lease was made, and the usual and commonly accepted meaning of the words used in the ordinary transactions of life should be given to the language used in the covenant." Orient Ins. Co. v. Pioneer Mill Co., 27 Haw. 698, 1924 WL 2881, *3 (Haw. Terr. 1924) (quotation omitted). 46
Moreover, under Hawai`i law, independently of express covenant, "a lessee is obligated to return leased premises at the termination of a tenancy in substantially the same condition as at the inception of a lease, subject to reasonable use." See Schimmelfennig v. Grove Farm Co., 41 Haw. 124, 1955 WL 8784, *3 (Haw. 1955). Section 8 obligated Plaintiff to return the Property upon the end of the Lease term without property damage, i.e, in substantially the same condition as he received it, subject to normal deterioration and wear and tear. See Lee v. Hwang, 165 P.3d 1048, 2007 WL 967112, *5 (Hawai`i App. 2007) (unpublished decision). Moreover, the Court finds that Plaintiff has failed to raise a genuine issue of material fact regarding whether the drilling of the well was an inspection or testing activity. Under the Property Option, drilling a well falls within Section 8 as an inspection and testing activity. Section 2.5 of the Property Option explicitly states that the Hamilton Defendants do not warrant the suitability of the land for Plaintiff's expressed purpose of creating a bottling facility (Doc. # 108, Declaration of Shikwan Sung ¶¶ 5-13)
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