Laeroc Waikiki Parkside v. K.S.K. (Oahu)

• Decision Date: 31 August 2007
• Docket Number: No. 27583.,27583.
• Citation: 166 P.3d 961
• Court: Hawaii Supreme Court
• Parties: LAEROC WAIKIKI PARKSIDE, LLC, a Hawai`i limited liability company, Plaintiff-Appellant v. K.S.K. (OAHU) LIMITED PARTNERSHIP, a Hawai`i limited partnership; Kenchiku Shiryo Kenkyusha, Limited, a Japan corporation, as general partner of K.S.K. (Oahu) Limited Partnership; Condotech's Hawaiiana Resorts, Inc., a Hawai`i corporation; Jay C. Bloom; Fred Izutsu; and Glenn Nakamura, Defendants-Appellees and Hospitality Investment Advisors, LLC a.k.a. Horwath Hospitality Investment Advisors, LLC and Horwath Investment Advisors, LLC, a Delaware limited liability company, and DOES 1-10, Defendants (Civ. No. 02-1-2013) Resortquest Hawaii, LLC dba Aston Hotel & Resorts Hawaii, a Hawai`i limited liability company, formerly known as Hotel Corporation of the Pacific, Inc. dba Aston Hotels & Resorts Hawaii, a Hawaii corporation, Plaintiffs-Appellees v. Laeroc Waikiki Parkside, LLC, a Hawai`i limited liability company, Defendant-Appellant and Does 1-50, Defendants Laeroc Waikiki Parkside, LLC, a Hawaii limited liability company, Third-Party Plaintiff-Appellant v. K.S.K. (OAHU) Limited Partnership, a Hawai`i limited partnership; Kenchiku Shiryo Kenkyusha, a Japan corporation; Condotech's Hawaiiana Resorts, Inc., a Hawaii corporation; Jay C. Bloom; Fred Izutsu; and Glenn Nakamura, Third-Party Defendants-Appellees (Civ. No. 02-1-2695) Laeroc Waikiki Parkside, LLC, a Hawaii limited liability company, Plaintiff-Appellant v. Hotel Corporation of the Pacific, Inc., dba Aston Hotel & Resorts Hawaii, a Hawai`i corporation, Defendant-Appellee and Does 1-10, Defendants (Civ. No. 03-1-1036).

166 P.3d 961

LAEROC WAIKIKI PARKSIDE, LLC, a Hawai`i limited liability company, Plaintiff-Appellant v. K.S.K. (OAHU) LIMITED PARTNERSHIP, a Hawai`i limited partnership; Kenchiku Shiryo Kenkyusha, Limited, a Japan corporation, as general partner of K.S.K. (Oahu) Limited Partnership; Condotech's Hawaiiana Resorts, Inc., a Hawai`i corporation; Jay C. Bloom; Fred Izutsu; and Glenn Nakamura, Defendants-Appellees and Hospitality Investment Advisors, LLC a.k.a. Horwath Hospitality Investment Advisors, LLC and Horwath Investment Advisors, LLC, a Delaware limited liability company, and DOES 1-10, Defendants (Civ. No. 02-1-2013)

Resortquest Hawaii, LLC dba Aston Hotel & Resorts Hawaii, a Hawai`i limited liability company, formerly known as Hotel Corporation of the Pacific, Inc. dba Aston Hotels & Resorts Hawaii, a Hawaii corporation, Plaintiffs-Appellees v. Laeroc Waikiki Parkside, LLC, a Hawai`i limited liability company, Defendant-Appellant and Does 1-50, Defendants Laeroc Waikiki Parkside, LLC, a Hawaii limited liability company, Third-Party Plaintiff-Appellant v. K.S.K. (OAHU) Limited Partnership, a Hawai`i limited partnership; Kenchiku Shiryo Kenkyusha, a Japan corporation; Condotech's Hawaiiana Resorts, Inc., a Hawaii corporation; Jay C. Bloom; Fred Izutsu; and Glenn Nakamura, Third-Party Defendants-Appellees (Civ. No. 02-1-2695)

Laeroc Waikiki Parkside, LLC, a Hawaii limited liability company, Plaintiff-Appellant v. Hotel Corporation of the Pacific, Inc., dba Aston Hotel & Resorts Hawaii, a Hawai`i corporation, Defendant-Appellee and Does 1-10, Defendants (Civ. No. 03-1-1036).

No. 27583.

Supreme Court of Hawai`i.

August 31, 2007.

Glenn K. Sato for plaintiff/defendant/third-party plaintiff-appellant Laeroc Waikiki Parkside, LLC.

Lissa H. Andrews and Devon Peterson (Rush Moore LLP), Honolulu, for defendants/third-part defendants-appellees Jay C. Bloom, Fred Izutsu, and Glenn Nakamura.

MOON, C.J., LEVINSON, NAKAYAMA, ACOBA, and DUFFY, JJ.

Opinion of the Court by ACOBA, J.

Plaintiff/Defendant/Third-Party Plaintiff-Appellant Laeroc Waikiki Parkside, LLC (Appellant) appeals from the November 14, 2005 final judgment of the circuit court of the first circuit (the court)¹ in favor of Defendants/Third-Party Defendants-Appellees Jay C. Bloom (Bloom), Fred Izutsu (Izutsu), and Glenn Nakamura (Nakamura) [collectively, Appellees] and against Appellant as to all claims and causes of action in the second amended complaint filed on May 9, 2003 (the Complaint) in Civ. No. 02-1-2013 [hereinafter C2013] and the third party complaint filed on June 4, 2003 in Civ. No. 02-1-2695 [hereinafter C2695] relating to Appellant's Purchase Agreement (Purchase Agreement or Agreement) of the Waikiki Parkside Hotel (the Hotel). The Complaint alleged breach of contract in Count I, breach of fiduciary duties in Count II, misrepresentation in Count III, nondisclosure in Count IV, indemnification in Count V, punitive damages in Count VI, and declaratory and injunctive relief in Count VII.

Appellant also challenges (1) as to the Complaint, the court's (a) May 12, 2004 order granting in part and denying in part Appellees' motion for summary judgment with respect to Counts I, II, III, IV, V, and VI and the joinder in Appellees' said motion by Defendants-Appellees K.S.K. (Oahu) Limited Partnership (KSK) and Kenchiku Shiryo Kenkyusha; (b) the May 19, 2005 order denying Appellant's motion for reconsideration of the court's February 16, 2005 oral grant of partial summary judgment; (c) the May 19, 2005 order denying Appellant's motion for partial summary judgment filed on March 22, 2005; and (d) the May 26, 2005 order granting in part and denying in part the motion for summary judgment filed by Defendant-Appellee Condotech's Hawaiiana Resorts, Inc. (Hawaiiana) and Appellees on Counts I, II, III, IV, V, and VI; and (2) as to the third party complaint, the October 19, 2005 order granting in part and denying in part Hawaiiana and Appellees' motion for partial summary judgment. The court did not express any specific reasons for granting summary judgment in any of the above orders or in the November 14, 2005 final judgment.

I.

We hold, as to:

(1) the court's May 12, 2004 order of summary judgment, that there was no genuine issue of material fact to controvert that Appellees were not parties to the Agreement inasmuch as they are plainly identified in and acted as the seller's agents in the sale of the Hotel;

(2) the court's May 26, 2005 order of summary judgment, that (a) judicial estoppel and Appellees' status as non-parties to the Agreement did not preclude them from raising the Nonrecourse Provision (Nonrecourse Provision or ¶ 8.2 of the Agreement) exempting Appellees from liability except for "fraud, willful misconduct or criminal misconduct" as a defense; (b) Appellant failed to produce allegations that satisfy the prima facie test for the tort of fraudulent inducement; (c) the Nonrecourse Provision expressly excludes fraud and willful misconduct from its scope; (d) Appellant failed to substantiate that any such fraud or willful misconduct existed here; and (e) Appellant's breach of fiduciary duty claims do not constitute fraud or willful misconduct, and therefore are subject to the Nonrecourse Provision;

(3) the May 19, 2005 orders, that based on the reasons in the preceding paragraph, the court was correct in denying Appellant's motions for reconsideration and partial summary judgment because Appellees were entitled to summary judgment as a matter of law;

(4) the October 19, 2005 order, that (a) for the same reasons, the court correctly granted Appellees' motion for summary judgment on Appellant's Third-Party complaint in C2695 and (b) because the Nonrecourse Provision covers Appellant's claims for breach of fiduciary duty, summary judgment was also appropriately granted as to Appellant's claim for contribution arising out of Appellant's settlement agreement with Plaintiff-Appellee Resortquest Hawaii, LLC dba Aston Hotel & Resorts Hawaii (Aston); and

(5) other arguments presented, that Appellant fails to raise meritorious claims.

II.

Prior to 2001, KSK owned the Hotel. Hawaiiana managed the Hotel for KSK.

In 1988, Izutsu became the general manager and oversaw the daily operations of the Hotel.

In May 1992, Izutsu began to report to Bloom, who had become the vice president and chief operating officer of Hawaiiana. In 1992, Nakamura also began working at the Hotel, and in 1999 he became chief engineer.

Starting in 1988, Izutsu held staff meetings with department heads at the Hotel and kept minutes of the weekly meetings (the Minutes). Copies of the Minutes were given to Bloom and were stored in boxes in a storage room at the Hotel. Appellant claims that Izutsu admitted the Minutes were a good starting point for anyone who wanted to know what happened at the Hotel. Appellant also claims that the Minutes are authentic and fall within an exception to the hearsay rules under Hawaii Rules of Evidence (HRE) Rule 803(b)(6) (1993 & Supp 2006).² Appellees do not challenge this contention.

Appellant contends the Minutes reflected that from at least 1992, the chilled water pipes for the air conditioning system in the Hotel (CWPs) had failed and allowed condensation to form within the wall cavities, causing mold to grow throughout the Hotel. Appellant further claims that the Minutes show water came through the windows and sliding glass doors, causing mold to expand behind the wallpaper, in guest rooms, and in other corridors of the Hotel.

In 1992, KSK renovations to the Hotel included re-insulation of the CWPs for the air conditioning system in the Hotel, replacement of the Hotel's wall coverings, and treatment of the walls for "mildew."

In the March 24, 1994 Minutes, it was reported that "[h]ydrochloric acid was used to unclog the pipes, causing strong odors. Engineering will schedule clearing of all vertical pipes during low occupancy."

Appellant contends the Minutes show that from at least late November 1996, mold was present and had to be cleaned from the air conditioning grills, the walls below the grills, and condensers within the guest rooms. Appellees point out that from 1996 to July 2001, when the Hotel was sold to Appellant, there were approximately 286 different reports of the weekly managers' meetings. Of these 286 reports, Appellant was only able to find ten instances where references were made to mold or mildew.

Appellant alleges that a letter dated April 11, 1997, which it refers to as the "Ferris Report," from Ferris & Hamig Hawaii, Inc., mechanical engineers (Ferris), to Art Suverkrupp (Suverkrupp), the Hotel's then-chief engineer, demonstrates that "the water chilling system in the Hotel was in `poor' condition and recommended that the water chiller should be replaced and `damaged piping insulation' should be repaired." Appellees answer that the Ferris Report "is nothing more than an incomplete, one page letter ..." which is undermined by "other documents in Appellant's possession [which] clearly establish that major work ... was done to the HVAC system after 1997." Appellees further contend that the Ferris Report is not admissible evidence because it is an incomplete document and is speculative as to what the author was attempting to state in the document. Appellees objected to the consideration of this document by the court.³

On May 14, 2001, prior to the signing of the Agreement, Aston and Appellant sent a due diligence check list (Hospitality Fax) to Bloom through a facsimile from Hospitality Investment Advisors, KSK's broker. The Hospitality Fax stated, "Attached are lists of items that [Appellant] and Aston will be requesting while conducting their due diligence at [the Hotel]. This advanced notice will give [Izutsu] an opportunity to expedite the process and minimize the disruption to his staff." Bloom responded and advised Appellant that, consistent with the Agreement, it was Appellant's duty to conduct its own due...