Honolulu Waterfront Ltd. v. Aloha Tower Dev.

• Decision Date: 08 July 1988
• Docket Number: 87-0732-ACK.,Civ. No. 87-0718-VAC
• Citation: 692 F. Supp. 1230
• Parties: HONOLULU WATERFRONT LIMITED PARTNERSHIP, et al., Plaintiffs, v. ALOHA TOWER DEVELOPMENT CORPORATION, et al., Defendants. ALOHA TOWER DEVELOPMENT CORPORATION, et al., Plaintiffs, v. HONOLULU WATERFRONT LIMITED PARTNERSHIP, et al., Defendants.
• Court: U.S. District Court — District of Hawaii

692 F. Supp. 1230

HONOLULU WATERFRONT LIMITED PARTNERSHIP, et al., Plaintiffs, v.ALOHA TOWER DEVELOPMENT CORPORATION, et al., Defendants.

ALOHA TOWER DEVELOPMENT CORPORATION, et al., Plaintiffs, v.HONOLULU WATERFRONT LIMITED PARTNERSHIP, et al., Defendants.

Civ. Nos. 87-0718-VAC, 87-0732-ACK.

United States District Court, D. Hawaii.

July 8, 1988.

Steven J. McHugh, Honolulu, Hawaii, for plaintiffs.

Melvin Kaneshige, Andrew Beaman, Leroy Colombe, Honolulu, Hawaii, for Aloha Tower.

Robert A. Marks, John Anderson, Deputy Attys.Gen., Honolulu, Hawaii, for State of Hawaii.

ORDER

KAY, District Judge.

I.

Aloha Tower Development Corp.("ATDC"), defendant in Civ. No. 87-0718 and plaintiff in the consolidated case of Civ. No. 87-0732, moves this court for summary judgment in this action regarding the validity and enforceability of a development agreement against Hawaii Waterfront Limited Partnership("HWLP") and Cordish Embry & Associates("Cordish Embry") collectively referred to hereafter as HWLP.DefendantsKent M. Keith("Keith") and Roger A. Ulveling("Ulveling") filed a statement of no opposition to this summary judgment motion.

II.

ATDC was created by the Hawaii legislature in 1981"for the purpose of undertaking the redevelopment of the Aloha Tower Complex to strengthen the international economic base of the community in trade activities, to enhance beautification of the waterfront, and in conjunction with the State Department of Transportation(`DOT') to better serve modern maritime uses, and to provide public access and use of the waterfront property."HRS Section 206J-1.ATDC initially negotiated unsuccessfully for the development of the Aloha Tower Complex with a development consortium including Southern Pacific Railway before contacting the development firm of Cordish Embry & Associates.Thereafter, Cordish Embry, in conjunction with others, organized HWLP which, in addition to Cordish Embry & Associates, consisted of Island Navigation Corporation(Realty), Ltd. and American Hawaii Cruises.

In 1985, the parties began to negotiate for the development of the Aloha Tower site and they entered an "Interim Development Agreement"(IDA) on April 16, 1985, which provided for exclusive negotiations between HWLP and ATDC for a development agreement and a lease of the waterfront property.HWLP agreed to pay ATDC $100,000.00 for the exclusive negotiation rights.It appears that HWLP paid only part of the $100,000.00 to ATDC.

The IDA provided that the parties were to enter into good faith negotiations to execute a development agreement and a land lease before April 25, 1986.The IDA also contained a list of 15 "major points of negotiation" which were contemplated to be included in the parties' negotiations.The exclusive negotiating agreement was extended by "Supplemental AgreementNo. 1" until July 25, 1986.

On July 7, 1986, the parties executed a four page letter agreement entitled "Development Agreement by and between Honolulu Waterfront Limited Partnership and Aloha Tower Development Corporation."The letter agreement states in pertinent part,

This letter will verify certain understandings reached between the parties and serve as a binding agreement between us concerning the Project.Preparation and execution of final documents shall proceed with due diligence and in good faith, and both parties agree to execute such other further documents as are necessary to effectuate this agreement.

HWLP's complaint asserts that the letter development agreement is the development agreement contemplated by the IDA.ATDC characterizes the letter development agreement as an agreement to agree or as an agreement to negotiate in good faith.

Although the letter development agreement discussed the general scope of the project under which HWLP would build a first-class hotel, office buildings, a retail complex, and maritime facilities; there were numerous essential terms still to be negotiated, including a master lease with DOT, minimum and percentage rental, what new maritime facilities would be constructed and who would pay for them, plans and specifications for a first-class hotel, office buildings, a retail complex, maritime facilities, parking facilities, and other public improvements, subordination provisions for HWLP's lenders, and creation of a tax increment district with the city (to which the Mayor had already indicated his opposition).

As an example, the lease provision states,

LEASE TERMS.The term of the lease ... shall be 64¾ years, and the term of the Master Lease shall be 65 years.The Partnership HWLP shall pay as yearly rent (a) a minimum amount which shall not be more than $821,000.00 plus an amount to pay the debt service on the bonds, or(b)a percentage rent as agreed upon by the parties, whichever is greater.The parties hereto understand that the total rent will be based on, inter alia, the amount of the bond issue, the Partnership's phasing schedule and further negotiation.(emphasis added).

In addition, almost every other provision contemplates further negotiation or requires approval of final plans and specifications by ATDC.

After the letter development agreement was signed, negotiations appear to have degenerated.HWLP seems to have pressed for continued negotiations while ATDC apparently refused to acknowledge that it had entered any agreement with HWLP.ATDC's position is evidenced by, amongst other things, two letters from ATDC to HWLP dated October 14, 1986 and November 13, 1986.In the November 13, 1986 letter, ATDC states in part,

The letter agreement of July 7, 1986 was entered into as an accommodation to you to provide your potential lenders with a document setting out the then current status of the negotiations between the parties....Even a cursory review of the letter agreement reveals that many major points have yet to be agreed upon, thereby making it obvious that the requisite "meeting of the minds" has not been achieved....We believe there is no way that the Interim Development Agreement, as supplemented by the letter agreement, can be interpreted as "firm contractual commitments."... Since the term of the Interim Development Agreement, as extended, has expired, it must once again be extended before further negotiations can take place....

HWLP alleges that it continued working on the Aloha Tower Complex at the urging of ATDC, Keith, and Ulveling up until fall of 1987.Further, HWLP alleges that it has expended over 2 million dollars in time and actual expenses in good faith performance under the letter development agreement.ATDC asserts that it repeatedly manifested its belief that no development agreement existed and that HWLP did not have exclusive negotiating rights after the expiration of the Interim Development Agreement.

A declaratory judgment action was filed by ATDC in state court on September 22, 1987, which was subsequently removed to this court on October 1, 1987, seeking a determination that no development agreement existed between HWLP and ATDC, that the IDA had expired, that the July 7, 1986 Development Agreement was not the "development agreement" contemplated by the IDA, and that ATDC had no continuing obligation to negotiate with HWLP.HWLP filed a countersuit in federal court on September 28, 1987(the suits are now consolidated) asserting claims including breach of contract and a request for specific performance of the agreement.

HWLP filed its second amended complaint on December 10, 1987.The instant motion for summary judgment was filed by ATDC on December 21, 1987 seeking dismissal of HWLP's second amended complaint, relief as requested in ATDC"s complaint, and attorneys' fees and costs.

III.

The court's scrutiny of this motion for summary judgment is to determine whether any material fact has been put into issue by the nonmoving party and if not, whether summary judgment should be granted as a matter of law.The Ninth Circuit has recently summarized the standard for summary judgment as follows:

if the nonmoving party will bear the burden of proof at trial as to an element essential to make its case, and that party fails to make a showing sufficient to establish a genuine dispute of fact with respect to the existence of that element, then summary judgment is appropriate.Second, to withstand a motion for summary judgment, the nonmoving party must show that there are `genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.'Finally, if the factual context makes the nonmoving party's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial.

California Architectural Building Products, Inc. v. Franciscan Ceramics, Inc.,818 F.2d 1466(9th Cir.1987)(citations omitted).

Broadly stated, HWLP asserts that the letter development agreement alone, or in conjunction with the IDA, and Supplemental Agreement # 1, constituted a valid and binding contract which ATDC has breached.ATDC asserts that the letter development agreement, even in conjunction with the IDA and Supplemental Agreement # 1, were merely steps in a series of negotiations and that the letter development agreement was an unenforceable agreement to agree.At hearing, ATDC conceded that for the purposes of this summary judgment motion that ATDC intended the letter agreement to be a binding development agreement, but argues that it nevertheless is unenforceable because it lacks essential terms.

ATDC asserts that all counts except for count IV (promissory estoppel) are based upon a finding that an enforceable contract exists.Absent an enforceable contract, ATDC asserts that none of the requested relief under counts I (breach of contract), II (declaratory judgment), III (specific performance), V (civil rights violation) or VI (injunction against dissolution of ATDC) can be granted and summary...