Burgess v. Arita

• Citation: 5 Haw.App. 581,704 P.2d 930
• Decision Date: 10 June 1985
• Docket Number: No. 9655,9655
• Parties: Rodney K. BURGESS, III and Carole Jane Burgess, Plaintiffs-Appellees, v. Frank Motoshi ARITA, Lindsey Tamio Arita, Dominis Garrida Anderson, and Jean Millicent Anderson, Defendants and Third-Party Plaintiffs-Appellants, v. George M. HASEGAWA, Third-Party Defendant-Appellee, and Patrick M. Sheather, Third-Party Defendant.
• Court: Court of Appeals of Hawai'i

Page 930

704 P.2d 930

5 Haw.App. 581

Rodney K. BURGESS, III and Carole Jane Burgess, Plaintiffs-Appellees, v. Frank Motoshi ARITA, Lindsey Tamio Arita, Dominis Garrida

Anderson, and Jean Millicent Anderson, Defendants and Third-Party Plaintiffs-Appellants, v. George M. HASEGAWA, Third-Party Defendant-Appellee, and Patrick M. Sheather, Third-Party Defendant.

No. 9655.

Intermediate Court of Appeals of Hawai'i.

June 10, 1985.

Partial Reconsideration Denied June 26, 1985.

Syllabus by the Court

1. An agreement to extend the closing date of a land sales contract may be inferred from the attendant circumstances and conduct of the parties.

2. Where the parties extended the closing date of a land sales contract so that a lessor's consent could be obtained and after the transaction was ready for closing, the seller sold and conveyed the property to a third party, the seller breached the contract and is answerable to the buyer in damages.

3. To satisfy the requirements of the Statute of Frauds, the writing need merely state with reasonable certainty the essential terms of the unperformed promises in the contract.

4. One who sustains loss by a breach of contract is entitled to just compensation commensurate with his loss.

5. One seeking damages must show his loss with reasonable certainty, which excludes a showing based on mere speculation or guess.

6. There is a split in authority among the states as to the measure of the buyer's loss or damages where the seller breaches a land sales contract and fails or refuses to convey. Under the American rule, the buyer is entitled to recover ordinary contract damages measured by the difference between the contract price and the market value of the land, together with any part payments of the price. The English rule limits the buyer's recovery to his own down payment plus interest and reasonable expenses incurred in investigating the title; only if the seller has acted in bad faith or has assumed the risk of a failure to secure title will he be liable for ordinary contract damages.

7. Hawaii adopts the American rule measure of damages awardable to the buyer where the seller breaches a land sales contract and fails or refuses to convey.

8. Where the plaintiff's claim is based on a written contract which does not provide for attorney's fees, attorney's fees are awardable under Hawaii Revised Statutes (HRS) § 607-14 rather than HRS § 607-17.

9. On appeal, if a finding of fact is not properly challenged, it is binding, and a conclusion of law supported by such finding and which applies the correct rule of law will not be reversed.

10. Where corporate officers or directors participate in tortious conduct, such as tortious interference with contractual relations, they are not shielded by the corporation and will be personally liable.

11. The elements of tortious interference with contractual relations are (1) a contract between the plaintiff and a third party, (2) the defendant's knowledge of the contract, (3) the defendant's intentional inducement of the third party to breach the contract, (4) absence of justification on the defendant's part, (5) the subsequent breach of the contract by the third party, and (6) damages to the plaintiff.

12. Where on the issue of tortious interference with contractual relations there is no evidence in the record of intentional inducement by the third-party defendant, the third-party plaintiff has failed to prove his claim, and the failure of the trial court to make any findings on this issue was harmless error.

Steven K.S. Chung (Walter G. Chuck, with him on the briefs; Walter G. Chuck, Attorney at Law, A Law Corporation, of counsel), Honolulu, for defendants and third-party plaintiffs-appellants.

Howard C. Glickstein (David C. Schutter, with him on the brief); Schutter, Cayetano, Playdon, Pavey, Honolulu, for plaintiffs-appellees.

Mark R. Thomason (Matthew S. K. Pyun, Jr., with him on the brief; Pyun, Okimoto & Thomason, of counsel), Honolulu, for third-party defendant-appellee.

Before BURNS, C.J., and HEEN and TANAKA, JJ.

TANAKA, Judge.

Defendants Frank Motoshi Arita and Lindsey Tamio Arita (collectively the Aritas) and Dominis Garrida Anderson (Anderson) and Jean Millicent Anderson (collectively the Andersons) (the Aritas and the Andersons being collectively referred to as Sellers) appeal from the judgment awarding plaintiffs Rodney K. Burgess, III (Burgess) and Carole Jane Burgess (collectively Buyers) damages for the breach of the Deposit Receipt, Offer and Acceptance dated November 30, 1976 (Burgess DROA), and dismissing Sellers' third-party complaint against George M. Hasegawa (Hasegawa). Sellers contend on appeal that (1) Buyers, rather than Sellers, breached the Burgess DROA, (2) if Sellers breached the DROA, Buyers were entitled to nominal damages only, (3) the award of attorney's fees to Buyers was excessive in amount, and (4) the trial court erred in dismissing Sellers' third-party complaint against Hasegawa. We affirm the judgment, except the award of attorney's fees which we modify.

The Trustees of the Estate of Bernice Pauahi Bishop (Bishop Estate) are the fee simple owners of the Kahuhipa Subdivision originally consisting of seventeen industrial lots. S & E, Inc. (S & E), a Hawaii corporation, is the master lessee of the subdivision for a term scheduled to expire on August 31, 1998.

Heeia Development Co. (Heeia), a general partnership consisting of three partners, constructed the subdivision site improvements. Two of Heeia's partners are associated with S & E, one of them being Hasegawa, who, together with his family, owns a 50% interest in S & E. The costs of the improvements were to be paid to Heeia by the lessees of the individual lots, although S & E remained primarily liable therefor.

On August 23, 1973, Bishop Estate and S & E, together as joint lessors, leased Lots 1225 and 1226 of the subdivision to the Andersons for a term of 55 years commencing September 1, 1973. The lease rent was fixed for the first 25 years. The lease required the lessee to construct an industrial-commercial type building having a value of not less than $50,000 on each of the lots within 36 months from September 1, 1973. The lease further required the written consent of the joint lessors for the lessees to assign the lease, to sublet, or to part with possession of the whole or any part of the demised land.

The pro rata costs of subdivision improvements assessed to Lots 1225 and 1226 totaled $37,950. The Andersons made a down payment of $9,487.50 and executed two promissory notes totaling $28,462.50 to Heeia. The unsecured notes required the payment of three annual installments of $9,487.50 each beginning September 1, 1974.

On May 22, 1974, the Andersons assigned 50% of the leasehold interest in Lots 1225 and 1226 to the Aritas. On July 17, 1974, Lots 1225 and 1226 were consolidated and designated as Lot 1576. Consequently, under the lease, a building having a value of not less than $100,000 was required to be built on Lot 1576.

Upon the request of S & E, Bishop Estate on April 6, 1976, granted a one-year extension of the building construction deadline. Under the extension, construction had to commence prior to March 1, 1977 and be completed by September 1, 1977, and S & E was "to withhold consent of sublease assignment until construction on [Lot 1576] is completed, unless the sublessees wish to renegotiate the sublease prior to such assignment." ¹ Plaintiffs' Exhibit 7. In turn, S & E granted Sellers an extension requiring the commencement of construction by January 1, 1977 and completion by June 1, 1977.

Under the Burgess DROA dated November 30, 1976, Sellers agreed to sell and Buyers agreed to purchase the leasehold for $74,200, payable $15,000 down and the balance of $59,200 by a two-year agreement of sale (A/S). The Burgess DROA provided, inter alia:

3. The obligations of Buyer and Seller hereunder are conditioned upon obtaining all necessary consents of third parties. Buyer and Seller shall cooperate and take all reasonable action to obtain such consents.

4. Property taxes, lease rents, ... shall be prorated as of: (1) the date of recording of the conveyance required hereby[.]

5. Buyer and Seller shall perform all their obligations set forth herein on or before 1-20, 1977. Buyer and Seller both agree that this time may be extended for a period of 30 days at the discretion of the Seller's Broker[.]

6. Buyer shall be given occupancy of the property (on the date of recording of the conveyance to Buyer ...)[.]

The Burgess DROA also provided that the transaction would be closed in escrow by American Abstract & Escrow (American Escrow).

Buyers deposited $15,000 in escrow. Sellers and Buyers executed the A/S dated January 21, 1977. American Escrow forwarded to S & E the executed A/S to which was appended a consent to the A/S to be executed by S & E. By letter dated February 4, 1977, S & E refused its consent indicating that no consent would be forthcoming until the construction on Lot 1576 was completed. ²

Thereafter both Sellers and Buyers exerted their efforts to consummate the transaction and impliedly extended the closing date. On September 20, 1977, Bishop Estate decided to increase the lease rental since the building construction deadline of September 1, 1977 had not been met. ³ On November 22, 1977, through the efforts of Buyers' attorney, Bishop Estate approved a further 12-month building construction time extension and rescinded the lease rental increase.

In the interim, on September 29, 1977, Walter C. Decker (Decker), President of Aloha Candle Company, Inc., submitted an offer to Anderson to purchase the leasehold for $90,000. Receiving no response, on November 25, 1977, Decker wrote to Anderson stating "please give me a price and I will let you know within 24 hours if I can meet it." Plaintiffs' Exhibit 47. Anderson telephoned Decker to tell him that he had an offer for $135,000. Decker said he would...