Sunday's Child, LLC v. Irongate Azrep Bw LLC , 666 F. App'x 587 ( 2016 )

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FILED
FOR THE NINTH CIRCUIT
NOV 15 2016
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
SUNDAY’S CHILD, LLC; et al., No. 14-15374
Plaintiffs-Appellants, D.C. No.
1:13-cv-00502-DKW-RLP
v.
IRONGATE AZREP BW LLC; et al., MEMORANDUM*
Defendants-Appellees.
Appeal from the United States District Court
for the District of Hawaii
Derrick Kahala Watson, District Judge, Presiding
Argued and Submitted October 20, 2016
Honolulu, Hawaii
Before: WALLACE, FARRIS, and WATFORD, Circuit Judges.
Plaintiffs Sunday’s Child, LLC, et al.,1 appeal the district court’s dismissal
without leave to amend. Sunday’s Child sued Defendant Irongate AZREP BW
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
1
Plaintiffs are four LLCs each sharing the same sole member and will be
collectively referred to hereinafter as “Sunday’s Child.”
LLC (“Irongate”) after Sunday’s Child purchased four condominium units in the
Trump International Hotel & Tower Waikiki Beach Walk condominium project
(the “Project”). Sunday’s Child raised Hawaii state-law claims of breach of
contract, conversion, tortious beach of contract, unjust enrichment, and breach of
the implied covenant of good faith and fair dealing, and requested the return of all
deposits paid in excess of Irongate’s actual damages in connection with the
condominium purchases.2
We review de novo whether a dismissal without leave to amend rests on an
inaccurate view of the law and is therefore an abuse of discretion. See Smith v.
Pac. Props. & Dev. Corp., 358 F.3d 1097, 1100 (9th Cir. 2004). We review the
district court’s interpretation and meaning of contract provisions de novo. Conrad
v. Ace Prop. & Cas. Ins. Co., 532 F.3d 1000, 1004 (9th Cir. 2008). We apply the
substantive law of Hawaii to this case. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78
(1938). We reverse.
A brief recitation of the facts is necessary to our analysis. In November
2006, Sunday’s Child executed separate Sales Contracts to purchase four Project
units, paying twenty percent of the purchase price as a deposit to Irongate for a
2
Sunday’s Child also brought a claim for punitive damages, but concedes
that it cannot maintain a standalone claim for punitive damages under Hawaii law.
Accordingly, we will not address this claim.
2
total of $1,439,320.00. Section D.37 of the Sales Contracts entitled Irongate to
declare Sunday’s Child in default or breach if it failed to perform any of its
obligations under the Contracts and to seek specific performance or terminate the
Contracts and retain the greater of fifteen percent of the purchase price or the
amount of actual damages suffered on account of the breach.
In July 2009, a series of disputes arose between Irongate and many
prospective purchasers, including Sunday’s Child. Several prospective purchasers
filed two lawsuits (the “Buyers’ Suits”) against Irongate, alleging various statutory
and common law claims. Sunday’s Child was not a party to the Buyers’ Suits,
although by agreement of counsel preserved its rights to participate in and/or
pursue claims made or asserted in the Buyers’ Suits. The purchasers in the Buyers’
Suits sought to nullify and rescind their Sales Contracts and obtain return of their
deposits.
In response, Irongate filed a separate lawsuit (the “Seller’s Suit”) against
some of the prospective purchasers, claiming breach of contract and tortious
interference with contractual relations and seeking specific performance of the
Sales Contracts, but not rescission or termination. Sunday’s Child was not named
in the Seller’s Suit. Instead, Sunday’s Child and Irongate resolved their
differences regarding the Project via a Settlement Agreement executed in 2011.
3
Under the Agreement, Sunday’s Child was to pay Irongate “additional
non-refundable payment[s]” in order to secure an extended closing for the units. If
Sunday’s Child was unable to timely close on the units, it would forfeit these
additional non-refundable payments and “release all rights and claims pursuant to
section 8.” Sunday’s Child was unable to make all of the scheduled additional
non-refundable payments and was unable to timely close on the units. Irongate
declared Sunday’s Child in default under Section D.37 of the Sales Contracts and
refused to return any of Sunday’s Child’s $1,439,320.00 in deposits, relying on
Section 8 of the Settlement Agreement. Resolution of this appeal turns on the
proper interpretation of Section 8 of the Settlement Agreement and its effect on
Section D.37 of the Sales Contracts.
Section 8 of the Settlement Agreement reads, in relevant part (emphases
added):
[Sunday’s Child] hereby releases [Irongate] from the claims made or
asserted, or that could have been made or asserted, in the Litigation . . .
; provided, however, that this release does not include or release claims
[against Irongate that Sunday’s Child] may have arising (a) after the
execution of this Agreement, (b) out of any design or construction
defect claims, known or unknown, and (c) out of the contractual duties,
rights, or obligations of [Irongate], if any, relating in any way to
[operation of the hotel, the Home Owners Association, and the Trump
license]. In other words, upon the execution of this Agreement, this
release is intended to forever release and waive any and all claims by
[Sunday’s Child] arising out of the purchase and sale of the Units and
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the Litigation, but is not intended to release, limit, or impair in any
respect [Sunday’s Child]’s claims as owner of the Units existing after the
execution of this Agreement, subject to and limited only by the release
described in this paragraph.
The district court interpreted the phrase “all claims . . . arising out of the
purchase and sale of the Units” as unambiguously releasing Irongate from any
claims relating to the purchase deposits. We disagree with the district court’s
conclusion that the Settlement Agreement is unambiguous. For instance, the
district court’s interpretation ignores Section 8(a) of the Settlement Agreement
preserving claims arising “after the execution of [the Settlement] Agreement.”
Here, Sunday’s Child’s claims arose after the signing of the Settlement Agreement:
Sunday’s Child failed to make its required payments under the Agreement after it
was signed, Irongate decided to declare Sunday’s Child in default before the
purchase and sale were complete, and Irongate then refused to return any portion of
the deposits.
Settlement agreements are “a species of contract” and are governed by the
principles of contract law. Wong v. Cayetano, 143 P.3d 1, 20 (Haw. 2006). An
unambiguous contract leaves “no room for interpretation.” Id. When a contract is
ambiguous, the intent of the parties is a question for the trier of fact. Found. Int’l
v. E.T. Ige Const., 78 P.3d 23, 33 (Haw. 2003). We are mindful that “[i]n the
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interpretation of a promise or agreement or a term thereof, . . . an interpretation
which gives a reasonable, lawful, and effective meaning to all terms is preferred to
an interpretation which leaves a part unreasonable, unlawful, or of no effect.”
Kutkowski v. Princeville Prince Golf Course, LLC, 300 P.3d 1009, 1017 (Haw.
2013) (emphasis added).
Here, all terms of Section 8 of the Settlement Agreement must be given
effect. The phrase upon which the district court based its interpretation declares
the Agreement “is intended to forever release and waive any and all claims by
[Sunday’s Child] arising out of the purchase and sale of the Units and the
Litigation.” The use of the conjunctive here makes it possible to interpret this
phrase in its entirety as releasing claims relating to the purchase and sale which
were set forth, or which could have been set forth, in the Litigation. The claims at
issue here, although they relate in a general sense to the purchase and sale of the
condominium units, post-date the Litigation and the signing of the Settlement
Agreement. Per Section 8(a), Sunday’s Child may not have released its right to
seek a partial refund of deposits—or to raise related claims—based on events
arising “after the execution of [the Settlement] Agreement.”
Irongate also argues that Section 4 of the 2011 Settlement Agreement
modified the 2006 Sales Contracts, such that Irongate was allowed to keep all
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deposit monies. Section D.37 of the 2006 Sales Contracts (the section under which
Sunday’s Child alleges the breach) reads as follows:
NOTWITHSTANDING THE FOREGOING, IF PURCHASER LOSES ITS
RIGHTS AND INTEREST IN THE UNIT AS A RESULT OF
PURCHASER’S BREACH OR DEFAULT UNDER THIS SALES
CONTRACT AFTER FIFTEEN PERCENT (15%) OF THE PURCHASE
PRICE HAS BEEN PAID BY PURCHASER, (EXCLUSIVE OF ANY
INTEREST ACCRUED THEREON), SELLER SHALL REFUND TO
PURCHASER ANY AMOUNT THAT REMAINS AFTER
SUBTRACTING (A) FIFTEEN PERCENT (15%) OF THE PURCHASE
PRICE OF THE UNIT (EXCLUSIVE OF ANY INTEREST EARNED
THEREON), OR THE AMOUNT OF DAMAGES INCURRED BY
SELLER AS A RESULT OF SUCH BREACH, WHICHEVER IS
GREATER, FROM (B) THE AMOUNT PAID BY PURCHASER WITH
RESPECT TO THE PURCHASE PRICE OF THE UNIT, EXCLUDING
ANY INTEREST EARNED THEREON.
Irongate argues that Section 4 of the Settlement Agreement modified this
provision, no longer requiring it to refund deposit monies remaining after
subtracting 15% of the purchase price. Section 4 states as follows (emphasis
added):
4. Extended Closing Date. Purchaser 2005 agrees to deposit into escrow an
additional non-refundable payment of [$98,790.00] for Unit No. 2005,
Purchaser 2205 agrees to deposit into escrow an additional non-refundable
payment of [$101,790.00] for Unit No. 2205, Purchaser 2217 agrees to
deposit into escrow an additional non-refundable payment of [$107,590.00]
for Unit No. 2217, and Purchaser 3607 agrees to deposit into escrow an
additional non-refundable payment of [$258,500.00] for Substitute Unit No.
3208 upon execution of this Agreement, and all Purchasers shall make best
efforts to close with cash no later than June 27, 2011, as scheduled by Seller
in accordance with the terms of the Sales Contracts and this Agreement.
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Such additional non-refundable payments shall be applied to the Total
Purchase Price at Closing of each respective unit. Should Purchaser 2005,
Purchaser 2205, Purchaser 2217 or Purchaser 3607 fail to close by June 27,
2011, such Purchaser has the right to one additional thirty (30) day-
extension to close, July 27, 2011; provided, however, that such Purchaser
agrees to pay a fee of $1,000.00 (“Extension Fee”) for each day of delay
after June 27, 2011. Such Extension Fee will not be applied to the Total
Purchase Price at Closing of each respective unit. Should all Purchasers
fail to close by June 27, 2011 or no later than thirty (30) days thereafter
subject to the Extension Fee, all Purchasers will forfeit to Seller all
additional non-refundable payments made pursuant to this section 4
and, furthermore, release all rights and claims pursuant to section 8.
Irongate asserts that “this provision was clearly intended to modify Section D(37)
of the Sales Contracts with respect to the return of deposits.”
Nobody disputes that Sunday’s Child failed to close by June 27, 2011.
Furthermore, nobody disputes that Sunday’s Child “forfeit[ed] to Seller all
additional non-refundable payments made pursuant to this section 4.” The issue is
whether the original deposits, made in 2006, count as “additional non-refundable
payments,” such that Sunday’s Child forfeited them. Essentially, Irongate argues
that the bolded language above changed Section D.37 of the Sales Contracts,
allowing Irongate to keep all deposits ever made by Sunday’s Child.
A plain reading of Section 4 shows that the language is at least ambiguous as
to this point. Section 4 required Sunday’s Child to make new payments, which
would be forfeited if Sunday’s Child did not close on the property by the agreed
8
upon date. Section 4, however, said nothing about the original deposit made in
2006 pursuant to Section D.37 of the Sales Contracts.
Furthermore, Section 4 only requires forfeiture of “additional” payments.
By this plain language, the payments that are forfeited must be in addition to some
other payment (that is not forfeited). Under this interpretation, the payments that
are forfeited could be the additional payments (made pursuant to the Settlement
Agreement), but might not include the original deposit (made in 2006). Moreover,
under this section of the Agreement, the only payments that would be forfeited
were payments made “pursuant to this section 4.” The original deposit (in contrast
to the $50,000 Sunday’s Child paid after signing the Agreement) was not made
pursuant to Section 4. The original deposit was made in 2006, five years before
Section 4 came into existence.
Accordingly, we conclude that the contract is ambiguous and we REVERSE
and REMAND for further proceedings.
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