84 Hawai'i 338, Warner v. Denis

• Decision Date: 27 February 1997
• Docket Number: No. 16026,16026
• Citation: 933 P.2d 1372
• Parties: 84 Hawai'i 338 Cynthia WARNER, Mark Sheehan and Ben Bollag, Plaintiffs-Appellants, v. Frank DENIS and Vetra Denis, Defendants-Appellees.
• Court: Hawaii Court of Appeals

Page 1372

933 P.2d 1372

84 Hawai'i 338

Cynthia WARNER, Mark Sheehan and Ben Bollag, Plaintiffs-Appellants, v. Frank DENIS and Vetra Denis, Defendants-Appellees.

No. 16026.

Intermediate Court of Appeals of Hawai'i.

Feb. 27, 1997.

Syllabus by the Court

Seller contracted in writing to sell "marketable title to" Lot 256 to Buyers. The contract stated that time was of the essence. Seller's wife, who was a joint tenant of Lot 256, did not contract to sell. After the contract was entered into, the Buyers were informed that utilities and a roadway serving Seller's adjoining Lot 255 and the fence on Seller's adjoining Lot 254 encroached on Lot 256. Buyers and Seller then entered into an On June 27, 1989 Seller contracted to sell Lot 256 to a third party for more than Buyers had agreed to pay for it. Unaware of what the Seller had done, Buyers informed the escrow agent on July 1, 1989 of the name of their purchasing partner. Thereafter, Seller informed Buyers and the escrow agent that he no longer wished to proceed with the Lot 256 transaction.

                [84 Hawai'i 341] Addendum which extended the closing date to May 9, 1989 and obligated Seller to "survey north boundary of Lot 254, south boundary of Lot 256 and note any encroachment of seller's improvements and submit same to buyers for their review."   On May 9, 1989 Buyers extended the closing date to June 8, 1989.  When June 8, 1989 arrived:  the Seller had not done anything with respect to the encroachment problems;  the Seller's wife refused to sell to Buyers;  and Buyers were not ready and able to close because they had not yet determined who their purchasing partner would be
                

This opinion concludes that none of the following reasons authorized Seller to terminate the contract or to bar Buyers from enforcing the contract: (1) the fact that Seller's wife did not contract to sell; (2) the fact that the Buyers and the Seller did not agree to a settlement regarding the encroachments on Lot 256; and (3) the fact that the Buyers did not tender performance on or before the June 8, 1989 scheduled closing.

Larry Gilbert and Robert Carson Godbey (Gilbert Jeynes & Godbey, of counsel), on the briefs, Honolulu, for plaintiffs-appellants.

Dennis Niles (Paul, Johnson, Park & Niles, of counsel), on the brief, Wailuku, for defendants-appellees.

Before BURNS, C.J., and ACOBA and KIRIMITSU, JJ.

BURNS, Chief Judge.

Plaintiffs Cynthia Warner (Warner), Mark Sheehan (Sheehan), and Ben Bollag (Bollag) (collectively, Plaintiffs) appeal the circuit court's April 22, 1992 Amended Judgment in favor of Defendants Frank Denis (Frank) and Vetra Denis (Vetra) (collectively, Defendants), and the February 25, 1992 Order Denying Plaintiffs' Motion for Reconsideration of Award of Attorneys Fees in Order Directing Entry of Judgment in Favor of Defendants Filed [January 9, 1992]. ¹ We conclude that the judgment in favor of defendant Frank is wrong.

Plaintiffs brought this case against Defendants to enforce a contract for their purchase of land and to recover damages resulting from the breach of the contract. ² The circuit court (A) dismissed the specific performance claim, (B) entered judgment in favor of the Defendants on the breach of contract damages claim, and (C) awarded Defendants $40,990.07 in attorney fees, $4,386.89 in costs, and interest at the rate of ten percent per annum on the entire judgment. Plaintiffs appeal (B) and (C). We conclude that with respect to Frank, (B) and (C) are wrong.

BACKGROUND

A. The Contract

Frank and Vetra are husband and wife. As joint tenants, they owned adjoining Lots The DROA for Lot 256 represented that Warner had provided an initial deposit of $1,000 and would pay an additional $4,000 deposit within "24 working days from acceptance of this offer." According to the terms of the DROA, Warner offered to purchase Lot 256 for $455,000, with a closing date of April 9, 1989. Warner proposed to pay the purchase price through a $100,000 down payment, a five-year, ten percent (10%) interest-only purchase money mortgage to be financed by the sellers, and a $350,000 balloon payment "due 60 months from date of closing of this transaction." Special Term No. 1 of the offer part of the DROA stated that the offer was "contingent upon buyer inspecting property/boundaries within 24 working days of this offer's acceptance."

[84 Hawai'i 342] 254, 255, and 256 in the Kalua Ko'i subdivision in West Moloka'i. In July 1988, Frank listed Lot 254 for sale through Jim Kingzett (Kingzett) of InterSource Realty Inc. On December 9, 1988, Warner, on behalf of herself and undisclosed others, ³ offered to purchase Lot 254 through Kingzett. On the same day, Sheehan and Warner, for themselves and undisclosed others, ⁴ made a separate offer for Lot 256. The offer for each lot was made on the May 1988 version of the Hawai'i Association of Realtors Standard Forms Deposit, Receipt, Offer, and Acceptance (DROA), ⁵ which included the standard "marketable title" and "time-is-of-the-essence" clauses.

The Standard Terms of the DROA stated in relevant part as follows:

B. EVIDENCE OF TITLE:

Seller shall furnish Buyer evidence of title from a licensed abstractor showing Seller's marketable title to the interest which is to be conveyed to Buyer. If Seller fails to deliver title as herein provided, Buyer at his option may terminate the agreement and any deposits shall be returned to Buyer. The foregoing shall not exclude any other remedies available to Buyer.

C. STAKING:

Seller shall order and pay for the cost of staking by a licensed surveyor if stakes are not visible. If Buyer wishes to confirm the accuracy of staking, he may order a survey prior to closing and Seller agrees to reimburse Buyer for the cost of this survey on or before closing only if the original stakes prove to be inaccurate. This provision does not apply to a condominium or co-operative apartment.

* * * * * *

K. TIME IS OF THE ESSENCE:

If either Buyer or Seller for reasons beyond his control cannot perform his obligation to purchase or sell the property by the closing date, then such party by giving escrow written notice prior to the closing date called for in this contract with copies to all parties to this contract, can extend closing for no longer than 30 calendar days to allow performance. Thereafter time is of the essence and the default provisions of Paragraph H apply. Any further extension must then be agreed to in writing by both parties. There is no automatic right to extend. This provision relates only to the extension of the closing date.

The DROA for Lot 254 included similar terms, except that the purchase price offered was $395,000, to be financed through a $95,000 down payment, a similar five-year, interest-only purchase money mortgage, and a $300,000 balloon payment.

Defendants did not sign either DROA. Instead, on December 23, 1988, Kingzett

[84 Hawai'i 343] transmitted a one-page memorandum to "BUYERS SHEEHAN ET. AL.," referencing the December 9, 1988 DROAs and setting forth the following counteroffers for Lots 254 and 256:

1. Lot 254--Purchase price $455,000 Down payment--no change Balance--$360,000

2. Lot 256--Purchase price $515,000 Down payment--no change Balance--$415,000

3. Terms for payment of balance:

Seller offers to provide financing on the above balances at an interest rate of 2% over prime set by Bank of America, San Francisco, as adjusted up or down quarterly (every three months), payable interest only, monthly with a balloon of all unpaid interest and principal 5 years from recordation.

"BUYERS SHEEHAN ET. AL." were further instructed that if they "accept the offer as countered above[,] please sign and date below[.]" In the signature blocks that followed, Sheehan signed as "Buyer" for both lots on December 28, 1988, and Frank, but not Vetra, signed his acknowledgment of the acceptance of both counteroffers on January 6, 1989. The DROAs for each lot, as modified by the counteroffer, will be referred to hereafter as the "Contract." ⁶

B. The Encroachments

On January 31, 1989 Warner requested that First American Title (escrow agent) open separate escrow accounts for the sale of Lots 254 and 256. In March 1989 Warner and Sheehan, accompanied by Frank and Kingzett, inspected Lot 256. At that time, Frank disclosed that the underground utility line, light poles and roadway serving the home on Lot 255, and the north boundary fence, encroached on Lot 256.

Warner and Sheehan wanted some assurances that these encroachments would not impair marketable title to Lot 256. During the inspection, however, Frank discussed with Kingzett the idea of an agreement which would allow Frank some time after closing of the sale to remove the encroachments.

C. The Addendum to the Contract

Following the inspection, the parties executed, in March 1989, an "Addendum to Contract of Offer to Purchase Lots 254 and 256 (Reference Date December 9, 1988)" (Addendum). The Addendum extended the closing date for the sale of both lots to May 9, 1989 and set forth the financial terms of the sales of both lots, as previously agreed to by the parties. Additionally, the Addendum included the following provision:

2. Buyers hereby approve boundaries of property and release contingency on special terms # 1 of the contract. Seller will survey north boundary of Lot 254, south boundary of Lot 256 and note any encroachment of seller's improvements and submit same to buyers for their review.

The Addendum was signed by Warner and Sheehan on March 9, 1989 and by Frank on b. Will have survey done so as to show exact encroachment as per boundary So. 256. (see exhibit A below as approx.)

[84 Hawai'i 344] March 10, 1989. After signing the Addendum, Frank faxed a copy of the signed Addendum to Warner and Sheehan, along with a message stating in relevant part as follows:

Exhibit A was a sketch by Frank, which showed that a road on Lot 255 slightly encroached on Lot 256 ⁷ and that a light pole and underground wire for the pole encroached...