Tmj Hawaii, Inc. v. Nippon Trust Bank

• Citation: 153 P.3d 444
• Decision Date: 31 January 2007
• Docket Number: No. 25588.,25588.
• Court: Supreme Court of Hawai'i
• Parties: TMJ HAWAII, INC., a Hawai`i corporation, Plaintiff-Appellant, v. NIPPON TRUST BANK, aka Nihon Shintaku Bank, a Japanese corporation, and Kelley Drye & Warren, a New York general partnership, and Kelley Drye & Warren LLP, a New York limited liability partnership, Defendants-Appellees.

153 P.3d 444

TMJ HAWAII, INC., a Hawai`i corporation, Plaintiff-Appellant, v. NIPPON TRUST BANK, aka Nihon Shintaku Bank, a Japanese corporation, and Kelley Drye & Warren, a New York general partnership, and Kelley Drye & Warren LLP, a New York limited liability partnership, Defendants-Appellees.

No. 25588.

Supreme Court of Hawai`i.

January 31, 2007.

Edward J. Bybee, on the briefs, Honolulu, for plaintiff-appellant.

George T. Okamura of George T. Okamura, AAL, ALC, Honolulu, and James N. Duca of Kessner Duca Umebayashi Bain & Matsunaga, on the briefs, Honolulu, for defendant-appellee Nippon Trust Bank, aka Nihon Shintaku Bank.

Robert J. Smolenski of Smolenski & Wooddell, on the briefs, Honolulu, for defendant-appellee Kelley Drye & Warren LLP.

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

Opinion of the Court by NAKAYAMA, J.

The corpus of the question presently before this court concerns the validity of a written instrument, executed on September 15, 1994, by which Ishimura Building Co., Ltd. ("Ishimura Building") purported to assign its claims against Nippon Trust Bank ("NTB") and Kelley Drye & Warren ("KDW") to TMJ Hawaii, Inc. ("TMJ").

According to the September 15, 1994 assignment, TMJ filed a complaint in the first circuit court on August 20, 1997. On October 31, 1997, KDW removed the action to the United States District Court for the District of Hawai`i ("district court"). Based upon the following recitation of facts, TMJ claimed that (1) NTB breached its contractual, professional, and fiduciary duties to Ishimura Building, and (2) KDW actively participated in perpetrating a fraud against Ishimura Building, in connection with the sale of two commercial real estate properties previously owned by Ishimura Building.

The district court, concerned about the validity of the September 15, 1994 assignment, certified to this court the question whether Hawai`i law recognizes the assignability of the tort claims of professional malpractice, breach of fiduciary duty, and fraud claims. For the following reasons, we now answer the certified question in the affirmative.

I. BACKGROUND

Trial has not yet commenced, and no evidence has been received. Accordingly, the following factual background relies primarily upon the information certified to this court by the district court, as well as the allegations contained within TMJ's amended complaint.

Ishimura Building was the owner of the Coconut Plaza Hotel in Honolulu, Hawai`i and the Kailua Professional Center in Kailua, Hawai`i. In May 1991, Ishimura Building retained NTB as its agent and advisor to aid in the sale of the two commercial properties. The agreement between Ishimura Building and NTB required NTB to sell the properties at the highest price and under the best terms possible. NTB subsequently retained the services of KDW to advise NTB with respect to the sale of Ishimura Building's properties.

A. The Coconut Plaza Hotel

KDW selected Windward Professional Realty ("WPR") to broker the sale of the Coconut Plaza Hotel. The record indicates that Ishimura Building authorized the execution of an agreement by which WPR would serve as Ishimura Building's exclusive representative and would receive $400,000 in compensation. However, TMJ alleges that NTB falsely represented to Ishimura Building that it was necessary to retain WPR as its exclusive sales representative because WPR had located a buyer for the Coconut Plaza Hotel. TMJ further alleges that NTB and KDW failed to disclose to Ishimura Building that the purpose for inducing Ishimura Building to authorize the exclusive representation agreement was that NTB and KDW were to receive $350,000 of the $400,000 commission from WPR. On August 1, 1991, the sale of the Coconut Plaza Hotel closed, and WPR was paid the $400,000 commission.

B. The Kailua Professional Center

With respect to the sale of the Kailua Professional Center, NTB and KDW negotiated with JVIH, Inc. ("JVIH") to purchase the property for $9,350,000. TMJ alleges that, following agreement of the aforesaid purchase price, NTB and KDW restructured the deal such that JVIH would pay $8,500,000 to Ishimura Building, and the remaining $850,000 would be dispersed as follows: (1) $200,000 to NTB; (2) $150,000 to KDW; and (3) $500,000 to Wise Board, Ltd., a Hong Kong corporation controlled by NTB and/or KDW. TMJ claims that NTB falsely represented to Ishimura Building that $8,500,000 was the highest price that could be obtained for the Kailua Professional Center. TMJ also claims that, had it not sold the Kailua Professional Center to JVIH for $8,500,000, it could have sold the property for its actual fair market value, or $10,500,000.

II. DISCUSSION

A. The Parties' Arguments

As previously mentioned, the question certified to this court is whether Hawai`i law recognizes the assignability of the tort claims for professional malpractice, breach of fiduciary duty, and fraud.

1. TMJ's opening brief

TMJ first argues that Hawaii Revised Statutes ("HRS") § 634-1 supports the assignability of claims, generally. HRS § 634-1 (1993) provides, in relevant part, that "[t]he assignee of any non-negotiable chose in action, assigned in writing, may maintain thereon in the assignee's own name any action which, but for the assignment, might be maintained by the assignor[.]" TMJ contends that HRS § 634-1 is an enabling statute, the intent of which is to enable an assignee to pursue an assignor's claim. For support, TMJ refers us to Hanu v. Yamaichi, 30 Haw. 959, 1929 WL 3031 (1929), which commented on HRS § 634-1 (then codified as Revised Laws of Hawai`i ("RLH") § 2361 (1925)).

TMJ also argues that the general rule is that claims are assignable, and that a claim's ability to survive the death of the claimant is the test for determining assignability. To that end, TMJ refers us to Alameda v. Spenser, 34 Haw. 667 (1938), which states, in relevant part, the following:

"All things in action which survive and pass to the personal representatives of a decedent creditor as assets, or continue as liabilities against the representatives of a deceased debtor, are, in general, thus assignable; all of which do not thus survive, but which die with the person of the creditor or of the debtor, are not assignable. The first of these classes, according to the doctrine prevailing throughout the United States, includes all claims arising from contract express or implied, with certain well-defined exceptions; and those arising from torts to real or personal property, and from frauds, deceits, and other wrongs, whereby an estate, real or personal, is injured, diminished, or damaged. The second class embraces all torts to the person or character, where the injury and damage are confined to the body and the feelings; and also those contracts, often implied, the breach of which produces only direct injury and damage, bodily or mental, to the person, such as promises to marry, injuries done by the want of skill of a medical practitioner, contrary to his implied undertaking, and the like; and also those contracts, so long as they are executory, which stipulate solely for the special personal services, skill, or knowledge of a contracting party."

Id. at 674 (emphases in original) (citation omitted). Applying the survival test, TMJ avers that "if Ishimura Building was an individual and died, Ishimura Building's fraud claims would survive."

TMJ further points out that although the certified question incorporates professional malpractice claims, the "First Amended Complaint" did not "specifically use the words professional malpractice" and it did not allege an attorney-client relationship existed between Ishimura Building and KDW. Nevertheless, TMJ argues that it could have pursued a legal malpractice claim, had one been assigned. TMJ acknowledges that some jurisdictions do not permit the assignment of legal malpractice claims where a highly personal and confidential relationship existed between the attorney and the assigning client. However, TMJ distinguishes those cases by asserting that "there was no highly personal or confidential attorney-client relationship between Ishimura Building and Defendants Kelley Drye."¹

Based upon the foregoing arguments, TMJ requests that this court answer the certified question in the affirmative.

2. NTB's and KDW's answering brief

NTB and KDW counter that the doctrines of champerty and maintenance mitigate against concluding that Ishimura Building's claims were assignable. They cite several cases stating that champertous agreements are contrary to public policy. NTB and KDW thus appear to assert that permitting TMJ, "an assetless, dissolved corporation which claims to be an assignee of Ishimura Building," to pursue Ishimura Building's claims is contrary to public policy.

Addressing TMJ's assertion that the assignability issue is resolved by HRS § 634-1, NTB and KDW argue that the statute's effect is merely procedural. They contend that the purpose of HRS § 634-1 was to supersede the common law rule requiring an assignee to pursue an assigned cause of action in the name of the assignor. NTB and KDW point out that Hanu interprets HRS § 634-1 as merely amending a common law procedural rule restricting the name under which an assignable claim could be pursued, as opposed to substantively altering the law to permit the assignment of an otherwise unassignable claim.

NTB and KDW next contend that Hawai`i law contemplates limits on the assignability of claims. On that score, they cite Austin v. Michiels, 6 Haw. 595, 1885 WL 5068 (1885), in which this court held that a tort action for damages caused to commercial credit and business reputation was not "of an assignable nature." Id. at 595-96. NTB and KDW also cite Cuson v. Maryland Cas. Co., 735 F.Supp. 966 (D.Haw.1990), which held that a claim for punitive damages based upon an alleged breach of contract was assignable insofar as "a punitive damages claim arising from a breach of contract action...