76 Hawai'i 487, Hawaiian Isles Enterprises Inc. v. City and County of Honolulu

• Decision Date: 15 September 1994
• Docket Number: No. 17296,17296
• Citation: 879 P.2d 1070
• Parties: 76 Hawai'i 487 HAWAIIAN ISLES ENTERPRISES INC., Plaintiff-Appellant, v. CITY AND COUNTY OF HONOLULU, Defendant-Appellee.
• Court: Hawaii Supreme Court

Page 1070

879 P.2d 1070

76 Hawai'i 487

HAWAIIAN ISLES ENTERPRISES INC., Plaintiff-Appellant, v. CITY AND COUNTY OF HONOLULU, Defendant-Appellee.

No. 17296.

Supreme Court of Hawai'i.

Sept. 15, 1994.

Karl K. Kobayashi (Gary G. Grimmer and Gary D. Weingarden with him on the briefs, of Carlsmith, Ball, Wichman, Murray, Case, Mukai & Ichiki), Honolulu, for plaintiff-appellant.

Nalani P. Wilson-Ku (Hazel G. Beh and Duane W.H. Pang with her on the briefs, for Corp. Counsel), Honolulu, for defendant-appellee.

Before MOON, C.J., and KLEIN, LEVINSON, NAKAYAMA and RAMIL, JJ.

RAMIL, Justice.

Plaintiff-Appellant Hawaiian Isles Enterprises (HIE) appeals the circuit court order granting Defendant-Appellee City and County of Honolulu (City) attorneys' fees arising from an action in which HIE alleged fraud and breach of contract.

HIE contends that: (1) the circuit court erred in granting the City attorneys' fees under section 25 of the Concession Agreement between HIE and the City; and (2) this court's decision in Bowler v. Board of Immigration, 7 Haw. 715 (1889), precludes the City from recovering attorneys' fees.

We disagree with HIE and affirm the circuit court's order granting attorneys' fees in favor of the City.

I. FACTS

As a result of a successful competitive bid, HIE entered into a "Concession Agreement" with the City to operate the Kapiolani Park Golf Driving Range Concession (concession). The Concession Agreement became effective on February 1, 1988, and ran for a period of five years in consideration of HIE's agreement to pay the City $26,000 per month in rent. After providing the City with written notice of termination, HIE ceased operation of the concession and vacated the premises on March 31, 1990.

On December 12, 1990, HIE filed a complaint against the City alleging: (1) fraudulent representation of services; (2) breach of contract; and (3) fraudulent representation of the lease as a concession. The crux of HIE's complaint was that the City fraudulently induced HIE to enter into the Concession Agreement by failing to disclose the City's plans to open the Ala Wai Golf Course Driving Range, in direct competition with HIE.

After a jury verdict on March 12, 1993, the court entered judgment on all counts in favor of the City. Thereafter, the City filed a motion for attorneys' fees under Hawai'i Revised Statutes (HRS) § 607-17 (1985) and section 25 of the Concession Agreement. On July 1, 1993, the circuit court granted the City's motion for attorneys' fees. This timely appeal followed. ¹ II. DISCUSSION

A. Attorneys' Fees Based on Section 25

of the Concession Agreement and HRS § 607-17

HIE contends that the circuit court improperly awarded the City attorneys' fees based on section 25 of the Concession Agreement and HRS § 607-17. The construction and legal effect given a contract provision governing the award of attorneys' fees is a question of law, which we review under the right/wrong standard. See Cho Mark Oriental Food, Ltd. v. K & K Int'l, 73 Haw. 509, 519, 836 P.2d 1057, 1063 (1992) (citation omitted).

It is well settled that "[n]o attorney's fees may be awarded as damages or costs unless so provided by statute, stipulation, or agreement." Food Pantry, Ltd. v. Waikiki Business Plaza, Inc., 58 Haw. 606, 618, 575 P.2d 869, 878 (1978) (citations omitted).

In the present case, section 25 of the Concession Agreement between HIE and the City provided:

[i]n the event the City shall, without any default, be made a party to any litigation, other than condemnation or like proceedings, commenced by or against the Concessionaire arising out of the concessionaire's use or occupancy of the premises or attributable to any structure or objects placed thereupon or therein by Concessionaire, then the Concessionaire shall pay all costs and reasonable attorneys' fees incurred by or imposed upon the City in connection with such litigation.

Attorneys' fees provided for by contract are governed by HRS § 607-17, which provides in relevant part:

Any other law to the contrary notwithstanding, where an action is instituted in the district or circuit court on a promissory note or other contract in writing which provides for an attorney's fee the following rates shall prevail and shall be awarded to the successful party, whether plaintiff or defendant:

(1) Where the note or other contract in writing provides for a fee of twenty-five per cent or more, or provides for a reasonable attorney's fee, not more than twenty-five per cent shall be allowed;

(2) Where the note or other contract in writing provides for a rate less than twenty-five per cent, not more than the specified rate shall be allowed;

provided that the fee allowed in any of the above cases shall not exceed that which is deemed reasonable by the court. ²

1. Plain Language of Section 25

Specifically, HIE argues that section 25 of the Concession Agreement does not apply because HIE's claim of "fraud and illegality" against the City did not arise from the "use and occupancy of the premises" nor were the claims "attributable to the structure or objects" on the premises. We disagree.

HIE relies on Azer v. Myers, 71 Haw. 506, 795 P.2d 853 (1990), for support. In Azer, a written contract provided for "the awarding of reasonable attorney's fees to the prevailing party where the lessor or broker commences litigation to enforce the terms of the listing agreement." Id. at 512, 795 P.2d at 857. Reversing the Intermediate Court of Appeals (ICA), we held that Azer's claim of breach of fiduciary duty against the brokers was "independent of any non-existent claim to enforce the listing agreement" and therefore outside the terms of the provision providing for attorneys' fees. Id. at 513, 795 P.2d at 857.

In the present case, it is undisputed that: (1) the City is a party to the litigation; and (2) litigation was commenced by the Concessionaire. The dispositive issue then, is whether the litigation arose out of HIE's "use or occupancy of the premises."

HIE alleged in its complaint: (1) fraudulent representation of services; (2) breach of contract; and (3) fraudulent representation of the lease as a concession. As HIE's complaint demonstrates, each of these claims arose from HIE's use or occupancy of the premises. The complaint alleged in relevant part:

Count I

(Fraudulent Representation of Services)

* * * * * *

25. In reliance on the Defendant's actions, Plaintiff's [sic] bid a high monthly rental payment ... unaware that Defendant was planning the opening of the Ala Wai Golf Driving Range, which subsequently opened and occasioned severe economic damages to Plaintiff, to which Defendant was unwilling to negotiate a reasonable adjustment to Plaintiff's monthly rental.

26. As a proximate result of the Defendant's fraudulent representations, Plaintiff suffered financial losses in the operation of the Kapiolani Park Golf Driving Range.

Count II

(Breach of Contract)

* * * * * *

30. On or about November 1989, Defendant thereupon occasioned a failure of consideration of subject contract by opening the Ala Wai Golf Driving Range which substantially and materially reduced patronage of the Kapiolani Park Golf Driving Range, the consideration for which Plaintiff agreed to pay Defendant $26,500.00 per month in rental.

* * * * * *

32. As a proximate result of Defendant[']s failure of consideration, Plaintiff suffered financial losses in the operation of the Kapiolani Park Golf Driving Range and was unable to operate at a profit.

Count III

(Fraudulent Representation of the Lease as a "Concession")

* * * * * *

38. The Defendant's representations characterizing the agreement as a concession were material and formed the basis for Plaintiff entering into the agreement, and were made by Defendant with the intention that Plaintiff should rely thereon. Such representations were known by the Defendant to be a fraudulent denomination of an illegal lease as a concession.

39. At the time the Defendant made such representations, the Defendant knew, or should have known, that as Trustees of Kapiolani Park, a public charitable trust, they were specifically prohibited from leasing said portions of Kapiolani Park pursuant to Act 53 of the Session Laws of 1896, approved the sixth day of June of that year.

* * * * * *

41. That as a proximate result of the Defendant's fraudulent representation of the lease agreement as a concession, Plaintiff did suffer loss and damages in dollar amounts to be proven at the time of trial.

(Emphasis added.)

The complaint also prayed for the following relief in relevant part:

2. As to Counts I and II, that the Defendant be required to account to Plaintiff for loss of profits which may have been realized over the five (5) year term of the contract;

3. As to Counts I and II, that the Defendant be required to account to Plaintiff for loss of use of funds expended in the operation of the Kapiolani Golf Driving Range;

* * * * * *

6. As to Count III, that Defendant be required to reimburse Plaintiff for all improvements, equipment, fixtures, and other funds, including, but not limited to, maintenance costs, and direct and overhead operating costs, expended in operating the Kapiolani Park Golf Driving Range[.]

Counts I and II allege lost profits related to the operation of the premises. Count III places in question the validity of the concession agreement, or in other words, whether HIE's use or occupancy of the premises was lawful. In addition, Count III seeks operating costs and expenditures.

As HIE's complaint demonstrates, HIE's claim against the City arose from its "use and occupancy" of the property. Therefore, HIE's action was clearly contemplated by section 25 of the Concession Agreement. Accordingly, the circuit court properly awarded attorneys' fees to the City under section 25 of the Concession Agreement.

2. Whether Section 25

is Limited to the City as a Third Party Defendant

In the alternative, HIE argues that section 25 is akin to an indemnity...