Low v. Minichino, 28980.

Decision Date29 September 2011
Docket NumberNo. 28980.,28980.
Citation126 Hawai'i 99,267 P.3d 683
Parties David T. LOW, Plaintiff–Appellee, v. Marie MINICHINO, Defendant–Appellant.
CourtHawaii Court of Appeals

Gary Victor Dubin (Long H. Vu with him on the brief), for DefendantAppellant.

Meyer M. Ueoka, for PlaintiffAppellee.

NAKAMURA, C.J., and LEONARD, J; and GINOZA, J., dissenting.

Opinion of the Court by LEONARD, J.

DefendantAppellant Marie Minichino (Minichino ) appeals from the December 26, 2007 Judgment entered by the Circuit Court of the Second Circuit (Circuit Court ) on: (1) an Order Denying Motion to Vacate Arbitration Award and for Fees and Costs; and (2) an Order Confirming Arbitration Award.1 The Circuit Court denied Minichino's motion to vacate an arbitration award on the basis of fraud and confirmed the arbitration award in favor of PlaintiffAppellee David T. Low (Low ).

On appeal, Minichino maintains that the Circuit Court erred in failing to vacate the award for fraud, or violation of public policy, resulting from Low's alleged perjury at the arbitration hearing. In the alternative, she contends that the court erred in failing to grant an evidentiary hearing concerning the allegation of fraud. We conclude that because Minichino presented evidence establishing a prima facie case of fraud, the Circuit Court erred in failing to hold an evidentiary hearing and failing to issue findings of fact and conclusions of law.

I. BACKGROUND

This dispute arises out of Minichino's cancellation of a real property purchase agreement (Deposit Receipt Offer and Acceptance or DROA ). On May 26, 2002, Minichino, a licensed realtor, entered into a DROA to purchase residential property from Low. The DROA contained a financing contingency allowing Minichino to terminate the contract on or before June 25, 2002, if she was unable to secure financing for the purchase. Under the DROA, if a party elected to terminate the contract, then "(a) Buyer or Seller shall promptly execute all cancellation documents requested by Escrow; and (b) Escrow shall return to Buyer all deposits previously made, less the amount of any escrow expenses or fees chargeable to Buyer." It further provided, "Any termination shall be in writing and delivered to Escrow to be effective."

Minichino was unable to secure financing to purchase the property as she apparently did not qualify for the requisite mortgage. On June 20, 2002, Minichino purchased a different, less-expensive, residential property.

On February 12, 2004, Low filed the complaint herein alleging that Minichino breached the DROA by failing to purchase the property. The Circuit Court compelled binding arbitration pursuant to the terms of the DROA.

After a November 3, 2006 hearing, on May 7, 2007, the arbitrator issued an award in favor of Low. The arbitrator found that Minichino did not advise Low of her desire to cancel the DROA until "sometime after July 24, 2002, at or near the time of the scheduled closing." He concluded:

....
2. As a licensed realtor, Defendant would have the requisite knowledge and experience to terminate a purchase, should it become apparent that she could not obtain the financing she required to complete the purchase. Those procedures are contained in the DROA (par. C20–21).
3. The Plaintiff relied upon the Defendant's status as a licensed realtor in allowing her to draft the DROA and complete the purchase.
4. Rather than keep the Plaintiff advised of the difficulties she was having in completing financing, there is no evidence that Defendant communicated with Plaintiff, or even attempted to communicate, those difficulties. She did not ask for an extension of closing, in writing.
5. There is no evidence that the Defendant availed herself of the termination provisions contained in the DROA, or gave Plaintiff any notice of her intent not to purchase the Property.
6. Instead, Plaintiff was left with the understanding that the Defendant was continuing with her efforts to complete the purchase of the Property, and he gave her additional time.
7. In the meantime, Defendant purchased a less expensive property in Paia.
8. Defendant testified that she could not recall many of the events regarding the purchase of the property. She did not recall receiving service of process for the instant action. Because of such testimony, the Arbitrator find[s] much of the Defendant's testimony not credible.
9. While Defendant did not qualify for the loan required to complete the purchase, because of her failure to keep Plaintiff appraised of the status of her failed efforts to clear her credit report; his ongoing reliance on her efforts to obtain financing; and her failure to give notice of termination, Defendant is estopped from asserting the failed financing contingency.
10. Defendant's action[s] place her in breach of the DROA.

The arbitrator awarded Low damages, attorney's fees, and costs totaling $83,964.70.

On May 11, 2007, Low filed a motion to confirm the arbitration award. On August 3, 2007, Minichino filed a motion to vacate the award on the ground that it had been procured by fraud—namely, Low's perjured testimony. In a declaration, she attested that at the arbitration hearing, she testified that she gave both oral and written notice, via email, to Low terminating the DROA but Low gave contrary testimony. She further averred that she had been previously unable to locate copies of the e-mails due to extensive flood damage to her files and computer hard drive, when her residence flooded on December 31, 2004, and again on October 16, 2006. Low allegedly "lied" at the arbitration, testifying that no such e-mails had been sent to him. Low did not submit any sworn statement in the Circuit Court proceeding.

After entry of the arbitration award, Minichino was able to locate copies of the e-mails she had sent to Low. The e-mails, dated from June 21 to 23, 2002, state Minichino's inability to secure financing and her cancellation of the DROA.2 They urge Low to stop threatening and harassing Minichino for her inability to complete the transaction. In support of her motion, Minichino also submitted extensive documentation of the flood damage to her property, including damage to her computer.

In the Circuit Court proceedings, Low did not deny his alleged testimony at the arbitration hearing, nor did he deny that he received the e-mails. However, his attorney attested that "at no time during the [arbitration] hearing did the Defendant mention that her evidence was lost because of [a] flood, nor did she make any request for adjournment of the hearing to allow her to look for the evidence." Low objected to the e-mails on the basis that Minichino had ample time to discover any such evidence during arbitration. He argued that Minichino waived any right to introduce new evidence by failing to request a postponement during arbitration to locate the e-mails.

At the hearing on the motion to vacate, the Circuit Court concluded that Minichino failed to establish fraud. The court denied Minichino's request to hold an evidentiary hearing. On December 26, 2007, the court issued orders confirming the award, denying Minichino's motion to vacate, and entered final judgment. Minichino timely filed a notice of appeal.

II. POINTS OF ERROR

Minichino asserts the following points of error on appeal:

(1) The Circuit Court erred in failing to vacate the arbitration award on the basis of fraud, as required by Hawaii Revised Statutes (HRS ) § 658A–23 (Supp. 2001) ;3

(2) The Circuit Court erred in failing to hold an evidentiary hearing and in failing to issue findings of fact and conclusions of law, as there were material facts in dispute as to whether the arbitration award was procured by fraud; and

(3) The Circuit Court erred in confirming an arbitration award that was contrary to established public policy against perjury and fraud.

III. APPLICABLE STANDARDS OF REVIEW

The appellate court reviews "the circuit court's ruling on an arbitration award de novo ," but is "mindful that the circuit court's review of arbitral awards must be extremely narrow and exceedingly deferential." Tatibouet v. Ellsworth, 99 Hawai‘i 226, 233, 54 P.3d 397, 404 (2002) (internal quotation marks, citations, and brackets omitted).

Arbitration awards are entitled to considerable deference for the following reasons:

First, because of the legislative policy to encourage arbitration and thereby discourage litigation, arbitrators have broad discretion in resolving the dispute. Upon submission of an issue, the arbitrator has authority to determine the entire question, including the legal construction of terms of a contract or lease, as well as the disputed facts. In fact, where the parties agree to arbitrate, they thereby assume all the hazards of the arbitration process, including the risk that the arbitrators may make mistakes in the application of law and in their findings of fact.
Second, correlatively, judicial review of an arbitration award is confined to the strictest possible limits. An arbitration award may be vacated only on the four grounds specified in HRS § 658[A]–9 and modified and corrected only on the three grounds specified in HRS § 658[A]–10. Moreover, the courts have no business weighing the merits of the award.

Schmidt v. Pac. Benefit Servs., Inc., 113 Hawai‘i 161, 165–66, 150 P.3d 810, 814–15 (2006) (citation omitted). This narrow and deferential review applies equally to arbitration awards subject to HRS § 658A. See, e.g., Mikelson v. United Servs. Auto. Ass'n, 122 Hawai‘i 393, 395–96, 227 P.3d 559, 560–61 (App.2010) (citations omitted).

IV. DISCUSSION
A. Grounds for Vacating the Arbitration Award

Minichino argues that the award was procured by fraud because the arbitrator's resolution of a central issue—whether she provided Low with written notice of her cancellation—turned on Low's allegedly perjured testimony. Her argument requires us to analyze the scope of the statute mandating vacatur of arbitral awards for fraud. HRS § 658A–23(a)(1).

As noted above, judicial review of arbitration...

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