Ueoka v. Szymanski

• Decision Date: 21 June 2005
• Docket Number: No. 25575, No. 25870.
• Citation: 114 P.3d 892,107 Haw. 386
• Parties: Meyer M. UEOKA, as Special Administrator of the Estate of Ryoichi Okuno, Deceased, Plaintiff/Counterclaim Defendant-Appellee, v. Michael J. SZYMANSKI, Defendant/Counterclaimant-Appellant, and Title Guaranty Escrow Services, Inc., and John Does 1-5, Defendants, and Joseph W. Hartley, III, Plaintiff-Intervenor-Appellee, v. Meyer M. Ueoka, Special Administrator of the Estate of Ryoichi Okuno, Deceased, Defendant/Crossclaimant/Crossclaim Defendant-Appellee, and Michael J. Szymanski, Defendant/Crossclaimant/Crossclaim Defendant-Appellant. Bank of Hawai`i, Special Administrator of the Estate of Ryoichi Okuno, Deceased, Plaintiff/Counterclaim Defendant-Appellee, v. Michael J. Szymanski, Defendant/Counterclaimant-Appellant, and Title Guaranty Escrow Services, Inc.; and John Does 1-5, Defendants, and Joseph W. Hartley, III, Plaintiff-Intervenor-Appellee, v. Bank of Hawai`i, Special Administrator of the Estate of Ryoichi Okuno, Deceased, Defendant/Cross-Claimant/Cross-Claim Defendant-Appellee, Michael J. Szymanski, Defendant/Cross-Claimant/Cross-Claim Defendant-Appellant.
• Court: Hawaii Supreme Court

114 P.3d 892

107 Haw. 386

Meyer M. UEOKA, as Special Administrator of the Estate of Ryoichi Okuno, Deceased, Plaintiff/Counterclaim Defendant-Appellee, v. Michael J. SZYMANSKI, Defendant/Counterclaimant-Appellant, and Title Guaranty Escrow Services, Inc., and John Does 1-5, Defendants, and Joseph W. Hartley, III, Plaintiff-Intervenor-Appellee, v. Meyer M. Ueoka, Special Administrator of the Estate of Ryoichi Okuno, Deceased, Defendant/Crossclaimant/Crossclaim Defendant-Appellee, and Michael J. Szymanski, Defendant/Crossclaimant/Crossclaim Defendant-Appellant.

Bank of Hawai`i, Special Administrator of the Estate of Ryoichi Okuno, Deceased, Plaintiff/Counterclaim Defendant-Appellee, v. Michael J. Szymanski, Defendant/Counterclaimant-Appellant, and Title Guaranty Escrow Services, Inc.; and John Does 1-5, Defendants, and Joseph W. Hartley, III, Plaintiff-Intervenor-Appellee, v. Bank of Hawai`i, Special Administrator of the Estate of Ryoichi Okuno, Deceased, Defendant/Cross-Claimant/Cross-Claim Defendant-Appellee, Michael J. Szymanski, Defendant/Cross-Claimant/Cross-Claim Defendant-Appellant.

Nos. 25575, 25870.

Supreme Court of Hawai`i.

June 21, 2005.

Reconsideration Denied July 18, 2005.

Ronald I. Heller and Laura Anderson (of Torkildson, Katz, Fonseca, Moore & Hetherington) in No. 25575 and James T. Paul, Judy A. Tanaka, and Colin A. Yost (of Paul, Johnson, Park & Niles) in No. 25870, Honolulu, on the briefs, for defendant/counterclaimant-appellant and defendant/crossclaimant/crossclaim defendant-appellant Michael J. Szymanski.

William F. Crockett (of Crockett & Nakamura), Wailuku, on the briefs, for plaintiff-intervenor-appellee Joseph W. Hartley, III.

MOON, C.J., LEVINSON, NAKAYAMA, and DUFFY, JJ. with ACOBA, J., concurring separately and dissenting.

Opinion of the Court by DUFFY, J.

This case involves two contracts to sell and purchase the same real property. The parties to the first contract are plaintiff/counterclaim defendant-appellee Ryoichi Okuno¹ and defendant/counterclaimant-appellant Michael J. Szymanski; the parties to the second contract are Szymanski and plaintiff-intervenor-appellee Joseph W. Hartley, III. Szymanski filed two separate appeals, which we consolidated. Szymanski's first appeal was docketed as Ueoka v. Szymanski, No. 25575 [hereinafter, first appeal], and his second appeal was docketed as Bank of Hawaii v. Szymanski, No. 25870 [hereinafter, second appeal]. Szymanski's first appeal was from the circuit court's December 27, 2002 orders denying Szymanski's motion to stay proceedings pending arbitration and granting Hartley's motion for separate trials. Szymanski's second appeal was from the June 26, 2003 final judgment² in favor of Hartley for specific performance, in accordance with the contract between Szymanski and Hartley.

In his first appeal, Szymanski argues that the circuit court erred by ruling that Szymanski was not entitled to an order staying proceedings pending arbitration because: (a) he fully complied with the requirements of Hawai`i Revised Statutes (HRS) § 658A-7 (Supp.2001); (b) he was not required to fulfill the requirements of HRS § 658A-9 (Supp. 2001); and (c) the Intermediate Court of Appeals' (ICA's) decision in Rainbow Chevrolet, Inc. v. Asahi Jyuken (USA), Inc., 78 Hawai`i 107, 890 P.2d 694 (App.1995), is controlling precedent in guiding our interpretation of HRS § 658A-7. Szymanski also argues in his first appeal that the circuit court erred in ruling that Hartley was entitled to a separate trial because Hartley's claims were not severable pursuant to HRS § 658A-7(g). In his second appeal, Szymanski argues that the circuit court erred by: (1) finding that Hartley's failure to deposit $50,000 into escrow was not a deliberate, material breach of contract; and (2) concluding that Hartley had reasonable grounds for insecurity about Szymanski's ability to perform his contractual obligations, which allowed Hartley to suspend his performance by paying the $50,000 deposit later than the contract specified.

When examining the two appeals together, Szymanski essentially has two arguments: (1) Szymanski should have been allowed to stay the circuit court proceedings pending arbitration because he complied with the necessary statutory requirements for arbitration; and (2) Hartley was not entitled to the remedy of specific performance because he deliberately and materially breached the contract between Szymanski and Hartley.

Based on the following, the circuit court's (1) December 27, 2002 orders denying Szymanski's motion to stay proceedings pending arbitration and granting Hartley's motion for separate trials; and (2) June 26, 2003 final judgment granting Hartley specific performance are affirmed.

I. BACKGROUND

On June 8, 1999, Okuno agreed to sell and Szymanski agreed to purchase [hereinafter, Okuno-Szymanski contract] five separate parcels of land, totaling approximately 53.94 acres of land located in Kula, Maui [hereinafter, the property] for $1,650,000.00. A material term of the contract was that Okuno would install four new County of Maui water meters on the property and connect them to the County water system. The transaction did not close, with each party blaming the other for the failure.

On March 22, 2000, Okuno attempted to cancel escrow and instructed Title Guaranty Escrow Services (Title Guaranty) to prepare a Notice of Escrow Cancellation Agreement. Szymanski refused to sign the agreement. Szymanski requested mediation (pursuant to the terms of the contract), but Okuno refused to mediate in the manner set forth in the contract. On August 23, 2000, Okuno filed a complaint in circuit court against Szymanski and Title Guaranty alleging that Szymanski was in default because he failed to make two payments ($403,000.00 and $1,237,000.00). Okuno requested that the circuit court rescind the Okuno-Szymanski contract and award Okuno $10,000.00 in damages for Szymanski's breach of contract, attorneys' fees, and costs. On November 21, 2000, Szymanski filed a counterclaim against Okuno, alleging that Okuno had breached the Okuno-Szymanski contract and requesting specific performance of the contract, monetary damages for Okuno's breach, and attorneys' fees and costs. On October 14, 2000, Okuno died and Meyer M. Ueoka (special administrator of Okuno's Estate) was substituted for Okuno as a party to the proceedings. On July 3, 2001, Szymanski filed a motion to stay proceedings pending mediation. Again, Okuno refused to mediate in the manner specified in the contract.

On August 8, 2002, while the Okuno-Szymanski lawsuit was pending, Szymanski entered into a contract to sell the same property to Hartley [hereinafter, Szymanski-Hartley contract] for $1,800,000.00. When the Szymanski-Hartley contract was made, Szymanski and Hartley intended that the Okuno-Szymanski transaction and the Szymanski-Hartley transaction would "close" concurrently in a "back-to-back" closing. Szymanski and Hartley intended that the following would occur in the "back-to-back" closing: (1) Okuno would convey the property to Szymanski; (2) Szymanski would convey the property to Hartley; (3) Hartley would pay Szymanski the purchase price of $1,800,000.00; (4) Szymanski would pay Okuno $1,650,000.00 from the funds received from Hartley; and (5) Szymanski would keep $150,000.00. In addition to providing the four water meters previously mentioned, the Szymanski-Hartley contract also required Szymanski to provide a fifth tax map key number.

Regarding payment of the purchase price of $1,800,000.00, the Szymanski-Hartley contract provided that the purchase price was to be paid in the following increments: (1) a $10,000.00 initial deposit; (2) a $50,000.00 additional payment to be deposited into escrow on or before August 14, 2002; and (3) the balance of the purchase price ($1,740,000.00) to be deposited into escrow before closing. Szymanski and Hartley agreed to a closing date of August 21, 2002, with the added provision that either party could extend the closing date for seven days. The closing date was subsequently extended to August 26, 2002. Hartley made the initial deposit of $10,000.00 on August 5, 2002 into the agreed-upon escrow account (with Szymanski as a party) at Title Guaranty's Wailuku, Maui office. Hartley did not make the additional $50,000.00 payment into the designated escrow account on or before August 14, 2002, allegedly because of Okuno's pending claim for judicial cancellation of the Okuno-Szymanski contract which gave Hartley grounds for insecurity as to Szymanski's ability to convey the property under the Szymanski-Hartley contract. Rather than make the $50,000.00 payment to the designated account, Hartley deposited $1,790,000.00 into an independent escrow account (to which Szymanski was not a party) at the Kihei, Maui office of Title Guaranty, to show that he (Hartley) could complete his contract purchase.

In August 2002, Hartley discovered that there were only three water meters on the property, not four, and notified Szymanski of this discrepancy; Szymanski then sent Ueoka repeated requests for evidence that there were four water meters on the property. Ueoka refused to acknowledge that there was an issue with the water meters and insisted that he was in full compliance with the Okuno-Szymanski contract. On August 14, 2002, the parties notified the circuit court of the problem with the water meters. Despite Hartley's willingness to proceed with the Szymanski-Hartley transaction even though only three water meters were on the property, Okuno and Szymanski could not resolve their conflicting claims for judicial cancellation and specific performance of their contract and claims for damages, attorneys' fees, and costs.

In early September 2002, the circuit court set the Okuno-Szymanski case for trial beginning January 21, 2003. On September 13, 2002, Hartley applied to intervene as a party under Rule 24(a) of the Hawai`i Rules of Civil Procedure (HRCP),³ alleging that he...