Lahaina Fashions, Inc. v. Bank of Haw.

• Decision Date: 21 February 2013
• Docket Number: No. 30644.,30644.
• Citation: 297 P.3d 1106,129 Hawai'i 250
• Parties: LAHAINA FASHIONS, INC., a Hawaii corporation, Plaintiff–Appellant/Cross–Appellee, v. BANK OF HAWAII, a Hawai‘i corporation; Hawaiian Trust Company, Ltd., as Trustee for Hawai‘i Real Estate Equity Fund; Hawai‘i Real Estate Equity Fund; Pacific Century Trust, a division of Bank of Hawai‘i as Trustee of the Hawai‘i Real Estate Equity Fund, Defendants–Appellees/Cross–Appellants and John Does 1–10, and Doe Entities 1–10, Defendants.
• Court: Hawaii Court of Appeals

129 Hawai'i 250

297 P.3d 1106

LAHAINA FASHIONS, INC., a Hawaii corporation, Plaintiff–Appellant/Cross–Appellee,

v. BANK OF HAWAII, a Hawai‘i corporation; Hawaiian Trust Company, Ltd., as Trustee for Hawai‘i Real Estate Equity Fund; Hawai‘i Real Estate Equity Fund; Pacific Century Trust, a division of Bank of Hawai‘i as Trustee of the Hawai‘i Real Estate Equity Fund, Defendants–Appellees/Cross–AppellantsandJohn Does 1–10, and Doe Entities 1–10, Defendants.

No. 30644.

Intermediate Court of Appeals of Hawai‘i.

Feb. 21, 2013.

Reconsideration Denied March 13, 2013.

Joseph M. Alioto and James M. Dombroski, for Plaintiff–Appellant/Cross–Appellee.

Terence J. O'Toole and Andrew Lautenbach, for Defendants–Appellees/Cross–Appellants.

FOLEY, Presiding Judge, FUJISE and REIFURTH, JJ.

Opinion of the Court by REIFURTH, J.

Plaintiff–Appellant/Cross–Appellee Lahaina Fashions, Inc. ("Lahaina") appeals from the July 8, 2010 Final Judgment, entered by the Circuit Court of the Second Circuit ("Circuit Court")¹ in favor of Defendants–Appellees/ Cross–Appellants Bank of Hawai‘i ("Bank"); Hawaiian Trust Company, Ltd. ("Hawaiian Trust"); Hawai‘i Real Estate Equity Fund ("REEF"); and Pacific Century Trust (collectively, "Defendants") following a jury trial.

On appeal, Lahaina claims that the Circuit Court erred in (1) denying its motion to correct the verdict and enter a judgment ("Motion to Correct Verdict and Enter Judgment") and its motion to deny the Defendants' proposed findings of fact and conclusions of law and to resubmit to the jury ("Motion to Resubmit"); (2) granting the Defendants' motion for judgment as a matter of law ("JMOL") as to Lahaina's breach-of-fiduciary-duty claim; (3) excluding from evidence Plaintiff's Exhibit 81 ("Exhibit 81"), which consists of (i) an email from the Bank's attorney James K. Tam ("Attorney Tam") to an officer at the Bank, and (ii) a letter from Lahaina's attorney, David H. Nakamura ("Attorney Nakamura"), to Attorney Tam; and (4) refusing to disclose all of Defendants' attorney-client communications concerning the property in question from 1994 through 2002.

Defendants filed a cross-appeal, asserting that the Circuit Court erred in denying three pre-judgment motions in which Defendants argued that Lahaina's tortious-interference claim was barred by the statute of limitations.

We affirm.

I. BACKGROUND

A. History of the Property and the parties

Prior to 1994, Lahaina held fee simple title to a parcel of commercial property at 744 Front Street in Lahaina, Maui (the "Property"). Lahaina, however, had incurred debt of nearly $3.4 million and, by early 1994, had defaulted on a $2.5 million mortgage held by International Savings & Loan ("International Savings"). International Savings was seeking to foreclose on the Property; consequently, Lahaina sought to sell the Property in order to repay its debts.

Defendants, through Hawaiian Trust, purchased the Property and leased the Property back to Lahaina for 50 years. The lease agreement between Hawaiian Trust and Lahaina ("Lease") gave Lahaina an option to purchase the Property from Hawaiian Trust for $6 million within the first ten years of the Lease should Lahaina wish to sell a fee simple interest to a third-party purchaser (the "Option"). Pursuant to the terms of the Option, Hawaiian Trust was entitled to 50% of any proceeds in excess of $9 million upon Lahaina's sale of the Property to a third party.

In the fall of 1999, Lahaina's largest anchor tenant, Planet Hollywood, surrendered its sublease on the Property. Consequently, Lahaina was unable to make its rental payments to Hawaiian Trust and defaulted under the Lease. On May 1, 2000, the then-owner of the Property, Pacific Century Trust, filed a lawsuit against Lahaina, seeking a judgment for possession, a writ of possession, and damages ("May 2000 Lawsuit"). On June 19, 2001, the trial court orally granted Pacific Century Trust's motion for judgment of possession and a writ of possession.

On July 13, 2001, before the trial court entered its judgment in favor of Pacific Century Trust, Lahaina filed a voluntary Chapter 11 bankruptcy petition with the United States Bankruptcy Court for the District of Hawai‘i ("Bankruptcy Court"). Lahaina asked the Bankruptcy Court to approve its sale of its leasehold interest in the Property to LoKo Maui, LLC in exchange for the payment of Lahaina's arrearage plus an additional $275,000.00 for Lahaina. The Bankruptcy Court approved the sale of Lahaina's leasehold interest in the Property. The May 2000 Lawsuit was subsequently dismissed with prejudice by stipulation.

B. The Complaint

Lahaina initiated the lawsuit which is the basis of this appeal on June 25, 2007,² asserting claims against Defendants for fraud, conspiracy to defraud, breach of fiduciary duty, and tortious interference with prospective business advantage. Lahaina claimed that the Defendants never intended to honor, and intentionally interfered with Lahaina's subsequent attempts to exercise, the Option. Lahaina alleged that the Defendants' actions caused Lahaina to sell its rights under the Lease for a substantial loss.

C. Trial

1. Testimony of George Weir

George Weir ("Weir"), who Lahaina describes as "the Bank's senior executive officer at the time it entered the agreement with Lahaina", testified at trial on April 27, 2009, on the issue of whether Defendants owed Lahaina any contractual or fiduciary duties. The testimony relevant to the issues on appeal concerned Weir's understanding of the legal effect of the Option:

Q. [by Joseph M. Alioto ("Attorney Alioto") ] All right. So if the option is exercised, you'd have to give clear title, wouldn't you?

A. [by Weir] Of course.

Q. Of course. So you have to make sure that its—the land—if the option is—if the option is exercised, you have to make sure that the land is clear?

A. Yes.

Q. You have to hold it in effect for Lahaina's benefit, if they exercise the option?

A. At the time—if they were to exercise their option and we were to accept it, at close of escrow, we'd have to deliver clean title.

Q. So you have an obligation to Lahaina to make sure that at—that if the option is in fact exercised, you're going to give him clear title?

A. At close of escrow, yes, sir.

Q. So in effect then, Lahaina would be a beneficiary and you would have the obligation to make sure nothing happens to the land if the option is closed?

A. At the time of the close of escrow we'd have to deliver it clear, as I say.

Q. So you have a duty to Lahaina to make sure that nothing happens in the meantime?

A. Certainly nothing that can't be fixed.

Q. So you have an obligation to make sure that either nothing happens or if something does, you've got to fix it?

A. True.

Q. And that's an obligation to whom?

A. Would be to the lessee, to the tenant.

Q. To?

A. Lahaina.

Q. Lahaina. Okay. Now, would you say that that puts you in a fiduciary relationship with them?

A. It's a stretch. I'll take that.

Q. You'll accept that?

A. A definition of a fiduciary is one who has a confidential relationship with another, which could extend to husband and wife. So sure.

Lahaina cites additional testimony from Weir of similar import and character.

2. Waiver of attorney-client privilege

On direct examination on May 5, 2009, Cassandra Joy Leolani Abdul ("Abdul"), who Lahaina calls a "senior officer of the Bank," responding to Defendants' counsel's question about who it was that made the decision about "what type of information to include in ... declarations [filed] in support of the motions in the [May 2000 Lawsuit]," testified that the Bank's attorney made the decision. When asked whether she advised the Bank's attorney "to not tell the judge that people had expressed an interest in the property," Abdul testified that she did not. The next day, Lahaina filed its motion in limine to find privilege waived and to compel discovery, arguing that the Bank waived its attorney-client privilege.

On May 11, 2009, the Circuit Court ruled, orally, that the Bank had waived the attorney-client privilege as to documents

relating to who made the decisions about what type of information to include in declarations in support of motions in the previous litigation with [Lahaina], to include who made the decision to disclose information concerning those individuals who had expressed an interest in the property, but not limited to that category.

Lahaina subsequently filed its motion in limine to determine the scope of waiver, arguing that the Circuit Court should find that Defendants were not entitled to rely on the attorney-client privilege for any communications between Defendants and their attorneys "from 1994 through 2002 with reference to any matter related to [the Property]" because the communications were either made in furtherance of fraud or had been waived by significant voluntary disclosures.

The Circuit Court examined the documents in camera, and, at a hearing on May 26, 2009, according to Lahaina, "refused to disclose all of the documents and selected only a few of the requested documents" for disclosure. On May 28, 2009, the court entered its Order Granting Plaintiff's Motion in Limine to Find Privilege Waived and to Compel Discovery, directing that Defendants produce

all previously withheld documents relating to who made the decisions on behalf of Defendants about what type of information to include in declarations filed with the Court ..., including, but not limited to, disclosure of information concerning individuals who had expressed an interest in purchasing [the Property].

3. Exhibit 81

Exhibit 81 consists of two documents. One document is a letter from Lahaina's attorney to the Bank's attorney, dated July 10, 2000, proposing settlement ("Letter"). The Letter states that Lahaina "makes this proposal so that it may finalize several pending offers to purchase both its 614 Front Street parcel and the 744 Front Street property." The other document is an email from the Bank's attorney to Abdul dated July 17, 2000 ("Email"), which states: "i [sic] agree with you...