Cho Mark Oriental Food, Ltd. v. K & K Intern.

• Decision Date: 09 September 1992
• Docket Number: Nos. 15183,15337,s. 15183
• Citation: 73 Haw. 509,836 P.2d 1057
• Court: Hawaii Supreme Court
• Parties: CHO MARK ORIENTAL FOOD, LTD., Chun O.K. Lee, and Hye Yon Pak, Plaintiffs-Appellants, v. K & K INTERNATIONAL, Young Ho Kim, Brother's Realty and Min Ho Yang, Defendants-Appellees.

Page 1057

836 P.2d 1057

73 Haw. 509

CHO MARK ORIENTAL FOOD, LTD., Chun O.K. Lee, and Hye Yon Pak, Plaintiffs-Appellants, v. K & K INTERNATIONAL, Young Ho Kim, Brother's Realty and Min Ho Yang, Defendants-Appellees.

Nos. 15183, 15337.

Supreme Court of Hawai'i.

Sept. 9, 1992.

Syllabus by the Court

1. Inasmuch as challenged conclusions of law derive from the facts and circumstances of the parties' relationship, reflected in the trial court's findings of fact, they are reviewed under the clearly erroneous standard.

2. Pursuant to the clearly erroneous standard of review, the trial court errs when, despite evidence to support the findings of fact, the appellate court is left with the definite and firm conviction, upon review of the entire record, that a mistake has been committed.

3. An agency relationship may be created through actual or apparent authority.

4. Actual authority exists only if there has been a manifestation by the principal to the agent that the agent may act on his account and consent by the agent so to act; actual authority may be created by express agreement or implied from the conduct of the parties or the surrounding circumstances.

5. Express actual authority requires an oral or written agreement between the parties that the principal has delegated authority that the agent has accepted and that authorizes the agent to do certain acts.

6. Implied actual authority may arise either independent of any express grant of authority or as a necessary or reasonable implication required to effectuate some other authority expressly conferred by the principal. The focus is on the agent's understanding of his authority inasmuch as the relevant inquiry is whether the agent reasonably believes, because of the conduct of the principal (including acquiescence) communicated directly or indirectly to him, that the principal desires him so to act.

7. Apparent authority arises when the principal does something or permits the agent to do something which reasonably leads another to believe that the agent has the authority he purports to have. The critical focus is not on the principal and agent's intention to enter into an agency relationship, but on whether a third party relies on the principal's conduct based on a reasonable belief in the existence of such a relationship.

8. Apparent authority can occur under the following circumstances: (1) The principal has manifested his consent to the exercise of such authority or has knowingly permitted the agent to assume the exercise of such authority; (2) the third person knows of the principal's actions and, acting in good faith, has reason to believe, and actually believes, that the agent possesses such authority; and (3) the third person, relying on such appearance of authority, has changed his position and will be injured or suffer loss if the act done or transaction executed by the agent does not bind the principal.

9. Where a trial court's findings of fact turn on the credibility of witnesses, due regard must be given to the trial court's opportunity to judge that credibility. Furthermore, where the trial court's determinations of fact are largely dependent upon the resolution of conflicting testimony, great weight will be accorded its findings of fact upon review.

10. While a lease is both a conveyance and a contract, its essence is contractual; accordingly, a lease is reviewed under principles of contract law.

11. As a general rule, the construction and legal effect to be given a contract is a question of law freely reviewable by an appellate court.

12. A contract term or phrase is ambiguous when it is capable of being reasonably understood in more ways than one. Absent an ambiguity, contract terms should be interpreted according to their plain, ordinary, and accepted sense in common speech.

Jerry A. Ruthruff, Honolulu, for defendants-appellees.

Gary G. Grimmer (Andy M. Ichiki, with him on the briefs, Carlsmith, Ball, Wichman, Murray, Case, Mukai & Ichiki, of counsel), Honolulu, for plaintiffs-appellants.

Before LUM, C.J., WAKATSUKI, MOON and LEVINSON, JJ., and JAMES S. BURNS, Intermediate Court of Appeals Chief Judge, in place of KLEIN, J., recused.

LEVINSON, Justice.

The plaintiffs-appellants Cho Mark Oriental Food, Ltd. (Cho Mark), Chun O.K. Lee (Chun Lee), and Hye Yon Pak (Pak) appeal the May 2, 1991 judgment, wherein the trial court found in favor of the defendants-appellees K & K International (K & K), Young Ho Kim (Kim), Brother's Realty (Brother's), and Min Ho Yang (Yang) on all the plaintiffs' claims arising from an alleged breach of a commercial lease. We affirm.

I.

All parties are members of a small, closely associated Korean immigrant community located near Ala Moana Shopping Center in Honolulu. Yang is a licensed real estate broker and owns and operates Brother's, a real estate firm. He primarily assists Korean immigrants in locating residential and commercial space. Kim owns several corporations, including K & K, which operate four retail outlets specializing in fine jewelry and European clothing. Chun Lee and Pak own and operate Cho Mark Restaurant, a Honolulu eating establishment. Both Kim and Yang, as well as their family and friends, patronized the Cho Mark Restaurant. Yang's mother and Kim's mother-in-law were friends; Yang's mother and Pak's mother were best friends--"almost like sisters." Pak's sister had bought her apartment through Yang, and Pak had purchased insurance from Yang's younger brothers. Yang, Kim, Pak, and Yang and Pak's mothers were, at one time, members of the Korean Bethel Baptist Church. They all left together to form their own church.

In April 1987, Kim purchased certain real property (the Sheridan Street property) through Yang, including a building (the premises) located at 808 Sheridan Street in Honolulu. Yang received a $40,000 commission from Kim for brokering the purchase of the Sheridan Street property. Kim's intent was to renovate the premises, formerly a printing business, into commercial leasehold space. Upon taking title to the premises, Kim listed K & K as the landlord of the premises, noting himself as the owner. He hired a general contractor (GC) to demolish the interior of the premises, partition new spaces to be leased commercially, and install five electrical panels for conversion of the existing 480 volt electrical service to 220 volt electrical service.

About the time Kim purchased the premises, Chun Lee and Pak decided to open a retail oriental food market. Pak approached Yang following a church service and asked him for assistance in finding space for the proposed food market. Yang showed Pak the premises while it was being gutted by the GC and informed her that, because renovations were not completed, she could get a favorable rental rate of one dollar per square foot. Pak and Chun Lee were interested in the proposition, and on April 24, 1987, Yang presented them with a lease agreement (the lease), unsigned by Kim. Although Chun Lee and Pak signed the lease in April 1987, they retained possession of it until July 1987, at which time they caused their signatures to be notarized. Kim executed the lease shortly thereafter. Chun Lee and Pak signed the lease in their respective capacities as officers of Cho Mark (hereinafter collectively Cho Mark), and Kim signed as president of K & K. Yang received no commission or compensation of any kind for his involvement in arranging the lease.

Although the lease was not formally executed until July 1987, Cho Mark took possession of the leased space (the space) sometime in April 1987 and began conforming the space to Cho Mark's particular needs. E.D. Lee, Chun Lee's husband, was responsible for renovating the space according to Cho Mark's specifications. He hired a journeyman electrician to install the necessary electrical wiring, outlets, and hookups downstream from the electrical panels, which were to be installed by the GC. Due to a misunderstanding among the parties, neither Cho Mark nor Kim secured the electrical permit required by Hawaiian Electric Company (HECO) from the appropriate municipal authority as a precondition to the installation of a separate electric meter for the space. Such a meter was necessary to supply the space with electricity of sufficient amperage to operate the large electrical appliances and machines required to operate a food market. Because Cho Mark never received sufficient electrical power, it never opened its doors and abandoned the space in March 1988.

On October 23, 1989, Cho Mark filed a second amended complaint against Kim, K & K, Yang, and Brother's for damages allegedly incurred as a result of the inadequate electricity supplied to the space. In substance, Cho Mark alleged that: (1) Yang had been acting as Kim and Cho Mark's dual agent in arranging the lease of the space; (2) Kim and Yang "were responsible for providing plaintiffs with a premises that had proper electrical hook ups" [sic] and failed to do so; and (3) "at no time ... did ... [they] inform any of [the] plaintiffs that the power supply ... was inadequate for and not adapted to" Cho Mark's needs. In their answers, Kim, K & K, Yang, and Brother's asserted that Cho Mark was legally responsible for any of its alleged losses because Cho Mark was responsible under the lease for obtaining the necessary permit for the electrical power it required. Following a bench trial, final judgment was entered in favor of all defendants. Cho Mark timely appealed.

II.

On appeal, Cho Mark challenges a multiplicity of the trial court's findings of fact (FOFs) and conclusions of law (COLs). Cho Mark contends, inter alia, that the trial court erred in determining that: (1) Yang was not Kim and Cho Mark's dual agent for purposes of arranging the lease and managing the renovations of the premises; (2) the lease did not provide that Kim was responsible for arranging the electricity for Cho Mark's intended use of the space; and (3) neither Kim nor Yang...