Sunday's Child, LLC v. Irongate AZREP BW LLC

• Decision Date: 06 June 2018
• Docket Number: CIVIL NO. 13–00502 DKW–RLP
• Citation: 327 F.Supp.3d 1322
• Parties: SUNDAY'S CHILD, LLC, Sunday's Third Child, LLC, Sunday's Fourth Child, LLC, and Sunday's Fifth Child, LLC, Plaintiffs, v. IRONGATE AZREP BW LLC, Defendant.
• Court: U.S. District Court — District of Hawaii

327 F.Supp.3d 1322

SUNDAY'S CHILD, LLC, Sunday's Third Child, LLC, Sunday's Fourth Child, LLC, and Sunday's Fifth Child, LLC, Plaintiffs,

v.IRONGATE AZREP BW LLC, Defendant.

CIVIL NO. 13–00502 DKW–RLP

United States District Court, D. Hawai‘i.

Signed June 6, 2018

Eric G. Ferrer, Laura P. Moritz, Louise K.Y. Ing, Alston Hunt Floyd & Ing, Honolulu, HI, J. Patrick Fleming, Jr., Case Knowlson LLP, Los Angeles, CA, for Plaintiffs.

Andrew James Lautenbach, Terence J. O'Toole, Maile S. Miller, Starn O'Toole Marcus & Fisher, Honolulu, HI, for Defendant.

ORDER (1) GRANTING DEFENDANT IRONGATE'S MOTIONS FOR SUMMARY JUDGMENT; AND (2) GRANTING IN PART AND DENYING IN PART IRONGATE'S MOTION FOR SANCTIONS

Derrick K. Watson, United States District Judge

INTRODUCTION

Irongate seeks summary judgment on the Sunday's Companies'¹ remaining claims for breach of contract, conversion, and unjust enrichment, as well as on its own Counterclaim for breach of contract arising out of the failure of the Sunday's Companies to close on the sale of four condominium units in Honolulu, Hawaii.

The Sunday's Companies' claims each turn on the parties' intent with respect to the material terms of a 2011 Agreement. Consistent with the Ninth Circuit's direction on remand, the parties present evidence on summary judgment of their intent and understanding of the material terms of the 2011 Agreement, terms that the Ninth Circuit determined were ambiguous. That evidence reveals that although Wang, the Sunday's Companies' owner, did not read or understand the 2011 Agreement that she admittedly executed, her attorneys negotiating the Agreement on her behalf understood its terms. Contemporaneous with the Agreement, these attorneys advised Wang that the Agreement waived and released Plaintiffs' claims to recover their original deposits paid for the four units in 2006. Irongate's interpretation was no different. Accordingly, because Plaintiffs' instant claims each seek the return of those original deposits released by the 2011 Agreement, the Court GRANTS Irongate's Motion for Summary Judgment on Plaintiffs' First Amended Complaint (Dkt. No. 132).

The evidence is equally unequivocal that the Sunday's Companies breached the 2011 Agreement by failing to make additional non-refundable payments when due and failing to close. As a result, Irongate is likewise entitled to summary judgment on its Counterclaim for Plaintiffs' Breach of Contract for Failure to Make the Additional Nonrefundable Payment (Dkt. No. 134).

Finally, because Wang and certain Plaintiffs' counsel, with full knowledge of the parties' intent with respect to the 2011 Agreement, advanced untenable theories of liability, interpreting the 2011 Agreement contrary to the undisputed evidence, and certified pleadings to the Court based upon what can only be seen as a misrepresentation, the Court GRANTS IN PART Irongate's Motion for Sanctions (Dkt. No. 202).

BACKGROUND

I. Factual Background

The Sunday's Companies seek to recover deposits paid under Sales Contracts for four condominium units in the Trump International Hotel & Tower at Waikiki Beach Walk (the "Project"). As a result of the Sunday's Companies' failure to close, Irongate, the Project's developer, contends that it is entitled to retain the original deposits and the additional non-refundable payment made by Plaintiffs following a 2011 Agreement between the parties. Irongate also seeks the balance of the additional non-refundable payments due under the Agreement that were never made.

A. 2006 Sales Contracts and 2011 Agreement

On November 9, 2006, the Sunday's Companies executed separate Sales Contracts to purchase four Project units, advancing twenty percent of the collective purchase price as a deposit to Irongate. Irongate Ex. X, Dkt. No. 133–25. These original deposits totaled $1,439,320, and the Sales Contracts indicated a cash purchase that was not conditioned on buyer financing. Id. ; 12/12/17 Jason Grosfeld Dep. Tr. 60, Dkt. No. 133–7. The Project was scheduled for construction and completion within six years, and under the identical Sales Contracts, Irongate could determine the closing date. In the event of default by the Sunday's Companies, Irongate was permitted to terminate, and Section D.37 of the Sales Contracts generally permitted Irongate to retain fifteen percent of the sales prices of the units with any deposit overage being returned to the purchaser.² Wang did not read the Sales Contracts before signing them. 10/6/17 Wang Dep. Tr. 33, 254–55, Dkt. No. 162–2.

In July 2009, a series of disputes arose between Irongate and several purchasers, including the Sunday's Companies. Several prospective purchasers filed at least two lawsuits against Irongate (the "Buyers' Suits"), alleging statutory and common law claims, based upon misrepresentations during the sales process. The plaintiff purchasers in the Buyers' Suits sought to nullify and rescind their Sales Contracts and obtain return of their deposits.³ The plaintiffs in these suits were represented by Hawaii attorney Warren Price. The Sunday's Companies were not named parties in the Buyers' Suits, but were represented by Price, and by agreement of counsel, preserved their rights to pursue claims made or asserted in the Buyers' Suits and postponed their closing dates.

Wang was introduced to Price by her attorney, Lyle Hosoda. Hosoda previously represented Wang on other real estate matters, but did not have a formal engagement agreement with her with respect to the acquisition of the four units in the Project.⁴ 10/6/17 Wang Dep. Tr. 80–83; 12/5/17 Lyle Hosoda Dep. Tr. 14–15, Dkt. No. 133–5; 12/15/17 Warren Price Dep. Tr. 17–20, Dkt. No. 133–6. Wang retained Price to represent the Sunday's Companies in connection with Irongate and the Project units sometime in 2009. 12/15/17 Price Dep. Tr. 19–20. Beginning in early 2011, several of Price's clients, including Wang, attempted to close under their original Sales Contracts, rather than attempt to recover their deposits in litigation. 12/15/17 Price Dep. Tr. 23–24. Wang signed a Confidentiality Agreement and reached out to negotiate directly with Irongate's principal, Jason Grosfeld, to achieve an agreement regarding the Project units. Irongate Ex. G (Confidentiality Agreement), Dkt. No. 133–8; 10/6/17 Wang Dep. Tr. 67–68, 73, 103–105. Wang met with Grosfeld in January 2011 at Irongate's offices in Los Angeles. 10/6/17 Wang Dep. Tr. 103–105.

By 2011, Wang did not have sufficient assets to pay cash for the four units because the value of her assets had decreased between 50 to 70% since the signing of the Sales Contracts. As a result, she intended to finance the remainder of the purchase. 10/6/17 Wang Dep. Tr. 46–47. During her meeting with Grosfeld, she says he told her that Irongate would not provide the financing that Plaintiffs needed. 10/6/17 Wang Dep. Tr. 105. Despite that, she never expressed to her counsel that she lacked the financial resources to close. 10/6/17 Wang Dep. Tr. 107.

On March 31, 2011, Grosfeld sent Wang an email with two possible options for closing on Plaintiffs' units: both offers were subject to an additional non-refundable down payment of 10% of the purchase price, a 30–day closing period, and a mutual release of all claims. Irongate Ex. H (3/31/11 Email); Dkt. No. 133–9. On April 6, 2011, Grosfeld followed up, sending an email to Wang, Hosoda, and Price, stating that "we must sign a deal very shortly or I will be forced to begin the steps toward default and termination of your contracts." Sunday's Companies' Ex. R (4/6/11 Email), Dkt. No. 162–18. Wang acknowledged that if no deal was made soon, Irongate would terminate the Sales Contracts and pursue remedies for default. 10/6/17 Wang Dep. Tr. 123–24.

Concerned that she would lose her original deposits of nearly $1.5 million (10/6/17 Wang Dep. Tr. 88), Wang sent Grosfeld a counteroffer by email on April 6, 2011 with four options. Among other things, her counter included asking for a "straightforward return" of the original deposits. It also proposed as an alternative "clos[ing] on two of my three studio units, and we can swap unit # 3607 for the same size unit on floors 30–34 which I understand have an average sales price of $2.5M. And, swap one studio unit for a one bedroom suite which has an average sales price of $1.5M." Irongate Ex. I (4/6/11 Email), Dkt. No. 133–10. Grosfeld left a voicemail message for Wang on April 11, 2011, advising her that her fourth proposed option might work for Irongate, but that he needed to clarify some matters with her. Irongate Ex. K (4/11/11 Email), Dkt. No. 133–12.

On May 5, Grosfeld sent an email to Wang accepting option four subject to "(i) a non-refundable down payment of 10% of the purchase price upon signing of the definitive agreement; (ii) a 30 day close; the contract amendment will provide for an extended closing option for an additional 30 days for a fee of $1000 per day; and (iii) a mutual release of any and all claims." Irongate Ex. L (5/5/11 Email), Dkt. No. 133–13. The balance due at closing was $5,757,280 plus closing costs, and "must be a cash purchase or a purchase financed by an institution other than Beach Walk Mortgage LLC ("BWM"), [Irongate's] wholly owned mortgage company." Id. A closing agreement was attached to the email, to be signed by May 9, 2011. Section 4 of the proposed agreement entitled "Extended Closing Date" provided that the purchaser "agrees to deposit into escrow an additional non-refundable payment" upon execution of the agreement. Grosfeld's email instructed: "if we don't hear from you or you reject this offer, we will begin the process of contract termination." Id. Wang received a revised agreement the next day from Price's office, correcting errors in the prior version of the agreement sent by Grosfeld. Irongate Ex. M (5/6/11 Email), Dkt. No. 133–14. Wang responded to Grosfeld on the May 9, 2011 deadline, asking to swap unit # 3607 for a lower floor unit at a lower price. Irongate Ex. N (5/9/11 Email), ...