85 Hawai'i 300, Pancakes of Hawaii, Inc. v. Pomare Properties Corp.

• Decision Date: 01 August 1997
• Docket Number: No. 19395,19395
• Citation: 85 Hawaii 300,944 P.2d 97
• Court: Hawaii Court of Appeals
• Parties: 85 Hawai'i 300 PANCAKES OF HAWAII, INC., a Hawai'i corporation, dba Maui Original Pancakes & Steak House, Plaintiff/Counterclaim Defendant-Appellant, v. POMARE PROPERTIES CORPORATION, a Hawai'i corporation, Defendant/Counterclaimant/Cross-Claim Defendant-Appellee, James S. Romig, Defendant/Cross-Claim Defendant-Appellee, Sofos Realty Corporation, a Hawai'i corporation, and Lee Carter, Defendants/Cross-Claim Plaintiffs-Appellees.

Page 97

944 P.2d 97

85 Hawai'i 300

PANCAKES OF HAWAII, INC., a Hawai'i corporation, dba Maui Original Pancakes & Steak House Plaintiff/Counterclaim Defendant-Appellant, v. POMARE PROPERTIES CORPORATION, a Hawai'i corporation Defendant/Counterclaimant/Cross-Claim Defendant-Appellee James S. Romig, Defendant/Cross-Claim Defendant-Appellee Sofos Realty Corporation, a Hawai'i corporation, and Lee Carter, Defendants/Cross-Claim Plaintiffs-Appellees.

No. 19395.

Intermediate Court of Appeals of Hawai'i.

Aug. 1, 1997.

R. Patrick Jaress (Jaress & Leong, of counsel), on the briefs, Honolulu, for plaintiff/counterclaim defendant-appellant.

William S. Miller, Margaret Jenkins Leong and Richard H.S. Sing (Goodsill Anderson Quinn & Stifel, of counsel), on the brief, Honolulu, for defendants/cross-claim plaintiffs-appellees Sofos Realty Corporation and Lee Carter.

Before BURNS, C.J., and KIRIMITSU, J., and Circuit Judge MARKS in Place of WATANABE, J., Recused.

KIRIMITSU, Judge.

In this fraud and misrepresentation case, Plaintiff/Counterclaim Defendant-Appellant Pancakes of Hawaii, Inc., a Hawai'i corporation, doing business as Maui Original Pancakes & Steak House (Pancakes), appeals from the Second Circuit Court's October 31, 1995 judgment granting the motion for summary judgment filed by Defendants/Cross-Claim Plaintiffs-Appellees Sofos Realty Corporation, a Hawai'i corporation (Sofos), and Lee Carter (Carter) and striking of Pancakes' demand for a jury trial. We agree with Pancakes that (1) neither Sofos nor Carter were parties to the lease agreement between Pancakes and Pomare Properties Corporation (Pomare Properties) and thus were estopped from relying on the jury waiver clause in the agreement, and (2) genuine issues of material fact remain on the veracity of statements made about both the actual occupancy rates and the amount of interest in the shopping center, as well as the information that should have been disclosed to Pancakes about the failure of the leasing program. Thus, we vacate that part of the October 31, 1995 judgment dealing with the issues addressed in this opinion and remand for a trial by jury. ¹

I. BACKGROUND

This controversy revolves around the Lahaina Shopping Center in Lahaina, Maui. The center was designed and developed by the 3900 Corporation, which leased the center to James Romig (Romig). Romig subsequently hired Pomare Properties as the managing agent of the center. Pomare Properties in turn hired Sofos to handle managing and leasing duties. (Carter was a real estate salesman working for Sofos.) Sofos and Carter, however, did not make any final decisions regarding the leases or their terms and did not sign the agreements as either landlords or agents. Pomare Properties made all final decisions and signed the shopping center leases.

In the spring of 1990, Sofos and Carter began actively recruiting potential tenants for the shopping center as a part of the leasing program. One of their targets was Pancakes, which at the time owned and operated two profitable restaurants in Honolulu. Carter contacted Young Acopan (Acopan), the president of Pancakes, and began discussions about Pancakes opening a third restaurant in the shopping center. According to Pancakes, Carter made glowing representations about the success of the leasing program and the potential for Pancakes to thrive in the new center. He allegedly told Pancakes that he was either in the process of signing up enough tenants that would soon make the center reach an eighty to eight-five percent occupancy level, or that he expected the center to have an eighty to eighty-five percent occupancy level at some point in the future.

After three months of negotiations and after having its attorney review the proposed lease agreement, Pancakes entered into a lease agreement with Pomare Properties on June 27, 1990. Pancakes subsequently built a restaurant in the shopping center and opened its doors in September of 1991. Unfortunately, the inability of the center to lease more than thirty-five percent of its space and the lack of foot traffic through the mall resulted in huge financial losses for Pancakes. Unable to sustain the losses, Pancakes closed its doors on December 7, 1991.

On December 31, 1991, Pancakes sued Romig, Pomare Properties, Sofos, and Carter for, among other things, fraud, misrepresentation, and breach of the duty of good faith and fair dealing. The complaint was amended on February 28, 1994. In its initial complaint, Pancakes requested a jury trial. On January 27, 1994, Pomare Properties moved to strike Pancakes' demand for a jury trial based on an express waiver in the lease agreement. ² Sofos joined the motion on February 9, 1994. On March 16, 1994, the Second Circuit Court granted the motion.

After settling with Romig and Pomare Properties on some claims and having others dismissed by summary judgment, Pancakes proceeded with its fraud and misrepresentation claims against Sofos and Carter. On February 6, 1995, Sofos filed a motion for summary judgment on Pancakes' first amended complaint. In the motion and subsequent hearing, Sofos argued that all of the representations allegedly made by Carter about occupancy rates and the leasing program were predictions or opinions about future events. Sofos additionally argued that any statements made by Carter were barred by an integration clause in the lease agreement between Pancakes and Pomare Properties. ³ The trial court agreed and granted the motion on May 22, 1995. On October 31, 1995, the trial court entered its judgment. On November 13, 1995, Pancakes filed a timely notice of appeal.

II. DISCUSSION

On appeal, Pancakes challenges the trial court's order striking the demand for jury trial and the order granting summary judgment on the fraud and misrepresentation claims. On the jury trial issue, Pancakes contends that Sofos and Carter were strangers to the lease agreement between Pancakes and Pomare Properties, do not have enforceable rights under the agreement, and thus cannot use section 29.04 of the lease agreement to shield themselves from a jury trial. Pancakes attacks the summary judgment order by contending that: (1) an integration clause never bars parol evidence of fraud; and (2) the amended complaint alleged genuine issues of material fact relating to fraud and failure to disclose. We address each argument in turn.

A. Waiver Of Jury Trial

Before addressing the merits of Pancakes' argument on the alleged waiver of trial by jury, we first discuss the standard of review and the relevant legal principles concerning the right to and waiver of a trial by jury.

1. Standard of review.

This issue involves the interpretation of a lease provision. "While a lease is both a conveyance and a contract, its essence is contractual; accordingly, we review the lease under principles of contract law." Cho Mark Oriental Food, Ltd. v. K & K Int'l, 73 Haw. 509, 519, 836 P.2d 1057, 1063 (1992) (citing Maui Land & Pineapple Co. v. Dillingham Corp., 67 Haw. 4, 10, 674 P.2d 390, 394 (1984)). Generally, "the construction and legal effect to be given a contract is a question of law freely reviewable by an appellate court." Id. (citing Stewart v. Brennan, 7 Haw.App. 136, 142, 748 P.2d 816, 821 (1988) (citing Hanagami v. China Airlines, Ltd., 67 Haw. 357, 364, 688 P.2d 1139, 1144 (1984))). Additionally, given the involvement of both a lease and an agent in this case, both contract and agency law must be applied.

Our goal when interpreting a contractual provision is to determine the intention of the parties. "The intention of the parties is to be gathered from the whole instrument, and if this cannot be discovered, but there exists an ambiguity, then such construction must prevail as is most strong against the covenanter [sic], for he [or she] might have expressed himself [or herself] more clearly." Coney v. Dowsett, 3 Haw. 685, 686 (1876) (internal quotation marks and citations omitted); see Gushiken v. Shell Oil Co., 35 Haw. 402, 416 (1940) ("Since one who speaks or writes, can by exactness of expression more easily prevent mistakes in meaning, than one with whom he [or she] is dealing, doubts arising from ambiguity of language are resolved in favor of the latter.") (internal quotation marks and citation omitted); see also Brazelton v. Jackson Drug Co., Inc., 796 P.2d 808, 810 (Wyo.1990) (any doubts concerning meaning of lease are resolved against party drafting it). Furthermore, the " 'terms of a contract should be interpreted according to their plain, ordinary and accepted use in common speech, unless the contract indicates a different meaning.' " Amfac, Inc. v. Waikiki Beachcomber Inv. Co., 74 Haw. 85, 108-09, 839 P.2d 10, 24 (1992) (quoting SGM Partners v. The Profit Co., 8 Haw.App. 86, 123, 793 P.2d 1189, 1212 (citing Maui Land & Pineapple Co., 67 Haw. at 10, 674 P.2d at 394, rev'd in part on other grounds, 71 Haw. 506, 795 P.2d 853 (1990))).

2. Legal principles of right to jury trial in civil cases.

The right to a jury trial in civil cases is ingrained in our state constitution. Article I, section thirteen explains that "[i]n suits at common law where the value in controversy shall exceed five thousand dollars, the right of trial by jury shall be preserved...." HAW. CONST. art. I, § 13. ⁴ Article I, section thirteen has been buttressed by the legislature, which reinforced the provision by statute: "When the right of trial by jury is given by the Constitution or a statute of the United States or this State and the right has not been waived, the case shall be tried with a jury." Hawai'i Revised Statutes § 635-13 (1993). Completing the trilogy, the Hawai'i Supreme Court acknowledged this right in the Hawai'i Rules of Civil Procedure (HRCP): "The right of trial by jury as given by the Constitution or a statute of the State or the United States shall be preserved to the parties inviolate." HRCP Rule 38(a). Given the recognition by two branches of the Hawai'i state...