Furuya v. Association of Apartment Owners of Pacific Monarch, Inc. , 137 Haw. 371 ( 2016 )

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Electronically Filed
Supreme Court
SCWC-30485
02-MAY-2016
09:30 AM
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
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________________________________________________________________
CLARENCE O. FURUYA AND LONA LUM FURUYA,
Petitioners-Respondents/Plaintiffs-Appellees/Cross-Appellants,
vs.
ASSOCIATION OF APARTMENT OWNERS OF PACIFIC MONARCH, INC.; JAMES
DOZIER; GRETA WITHERS; ELWIN STEMIG; FOIL CRAVER; KAZUO SAWADA,
Respondents-Petitioners/Defendants-Appellants/Cross-Appellees.
________________________________________________________________
SCWC-30485
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(NO. 30485; CIV. NO. 06-1-1057)
MAY 2, 2016
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY WILSON, J.
Petitioners-Respondents/Plaintiffs-Appellees/Cross-
Appellants Clarence O. Furuya and Lona Lum Furuya (the Furuyas)
and Respondents-Petitioners/Defendants-Appellants/Cross-
Appellees, Association of Apartment Owners of Pacific Monarch,
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Inc. (AOAO) both filed applications for writ of certiorari. The
applications concerned various issues related to the Furuyas’
interests in an apartment unit located at the Pacific Monarch
Condominium (Pacific Monarch) and 106 parking stalls which are
appurtenant to the unit. We accepted both applications for writ
of certiorari. Below, we address the arguments raised in the
Furuyas’ application for writ of certiorari and for the reasons
discussed herein, we affirm the Intermediate Court of Appeals’
(ICA) judgment on appeal. We do not address the arguments
raised by AOAO in its application for writ of certiorari, as
AOAO failed to demonstrate that the ICA erred.1
1
AOAO raised claims regarding: (1) the Furuyas’ obligation to pay
lease rent for the parking stalls after April 26, 2014, and (2) AOAO’s use of
two of the parking stalls without compensating the Furuyas. As to AOAO’s
first claim, the ICA held that the circuit court did not err in interpreting
the conveyance document from the developer to the initial lessees as
indicating that the developer intended to give up its right to lease rent of
the parking stalls after 2014. Furuya v. Ass’n of Apartment Owners of Pac.
Monarch, Inc., No. 30485, at 12-14 (App. Apr. 25, 2014) (mem.). In addition,
the ICA held that the Furuyas had no statutory obligation to pay lease rent.
Id. at 18. In regards to AOAO’s second claim, the ICA held that the circuit
court abused its discretion in estopping the Furuyas from seeking damages for
AOAO’s use of the two stalls after the filing of the Furuyas’ initial
complaint. Id. at 28. The ICA’s holdings were not erroneous.
We note that AOAO did not raise a claim to the ICA for unjust
enrichment or quantum meruit based on the Furuyas’ obligation to pay lease
rent on the parking stalls after April 26, 2014. Id. at 16 n.11. Our
affirmance of the ICA’s memorandum opinion does not address the merits of
such a claim.
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I. Facts
A. Background
The Pacific Monarch is a condominium project located
in Honolulu, Hawaiʻi. The AOAO of the Pacific Monarch was
created to “provide the management, maintenance, protection,
preservation, control and development” of the Pacific Monarch.
AOAO is governed by its Board of Directors (Board). In 1979,
apartment unit 3206 and the parking stalls were conveyed by
Hasegawa Komuten (USA), Inc., the developer of the Pacific
Monarch, to the initial lessees, via the Pacific Monarch
Condominium conveyance document. The Furuyas acquired the
leasehold interest to apartment unit 3206 at the Pacific Monarch
for $560,000 through a foreclosure sale in July 1985. Pursuant
to the original conveyance document, unit 3206 was conveyed to
the original owners with several appurtenant easements,
including an exclusive appurtenant easement to parking stalls 1
through 106 of the condominium. The Furuyas acquired the
leasehold interest in apartment unit 3207 in December 1989.
B. AOAO’s Purchase of the Leased Fee Interest in the
Condominium and the Furuyas’ Execution of the DROAs
In 1995, AOAO, through the Board, sought to purchase
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the leased fee interest2 in the condominium from the lessor to
offer the owners the opportunity to own the leased fee interests
in their units. To proceed with the purchase, the Board amended
its Bylaws. Article III of the amended November 14, 1995
Restated Bylaws conferred certain “powers and duties” to AOAO’s
Board, including, “Implementation of the Acquisition of the
Leased Fee Interest in the Land from Lessor.” The Board was
authorized and had the power to do all things it deemed
necessary to enable the lessor to sell the leased fee interest
to AOAO and/or its members. The Bylaws further stated that on
behalf of AOAO, the Board was authorized to purchase all or any
portion of the leased fee interest in the land from the lessor
and expressly authorized to transact any and all other matters
relating to the acquisition. The Board was also required to
obtain agreement from owners who represented at least 75% of the
common interest to (1) ratify AOAO’s purchase of the leased fee
interest, and (2) commit to and contract for the purchase of
their leased fee interest.
As noted, the Furuyas owned a leasehold interest in
unit 3206 and the appurtenant easement to the 106 parking
2
“If real estate is encumbered by a lease, the ownership interest
in that property is considered a leased fee interest rather than a fee simple
interest because ‘the possessory interest has been granted to another party
by creation of a contractual landlord-tenant relationship (i.e., a lease).’”
Plaintiff’s Proof of a Prima Facie Case § 7:2.50.
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stalls, as well as a leasehold interest in unit 3207. The Board
sent the Furuyas a survey dated April 23, 1996 asking them to
indicate whether they intended to purchase the leased fee
interests in their two units and the parking stalls.3 The
Furuyas signed the document, checking off a pre-printed line
that stated, “YES, I plan to purchase my leased fee interest in
Unit #3206 at $28,756.85, Unit #3207 at $28,756.85 and 106
Parking Stalls at $459,131.19.”
On or around October 16, 1996, the Furuyas executed a
document titled “Pacific Monarch Leased Fee Interest Sales
Contract Deposit Receipt Offer and Acceptance” (DROA), in
preparation for the bulk sale of a number of units in the
condominium. The Furuyas filled out and signed the portion of
the DROA titled “Offer.” The Furuyas handwrote “3206” following
the section stating, “[t]he buyer is buying the leased fee
interest to the following apartment or commercial unit in the
Pacific Monarch project.” Attached to the DROA was an exhibit
indicating the prices for the various units. Units 3206 and
3207 were priced at $28,756.85. The 106 parking stalls were
also included in the attached exhibit and priced at $459,131.19.
The portion of the DROA titled, “Acceptance” stated, “The
3
The other condominium owners received similar surveys. The
survey stated, “This is NOT a contract for the purchase of your leased fee
interest.”
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Association agrees to sell the Property to the Buyer or its
designee at the price and upon the terms set forth herein,
including the Additional Terms attached hereto.” The
“Acceptance” portion provided a line for AOAO to sign as
“Acceptance” of the DROA. The DROA in the record was not signed
by AOAO and there is no evidence in the record that AOAO ever
signed the “Acceptance” portion of the DROA. The Furuyas also
signed a DROA for unit 3207.4
The DROAs for units 3206 and 3207 set the closing date
for the acquisition of the leased fee interest for the two units
as December 9, 1996. In accordance with the instructions in the
DROA, the Furuyas sent $1,000 per unit to open escrow for both
units 3206 and 3207. The purchase of the leased fee interest in
unit 3207 closed with the bulk sale of the leased fee interests
in a number of other units in the condominium on December 27,
1996.5
Although escrow was opened for the purchase of the
leased fee interest in unit 3206 and the Furuyas deposited
$1,000 into escrow with Title Guaranty of Hawaiʻi (Title
Guaranty) for the unit, the sale of the leased fee interest in
4
The DROA for unit 3207 contained in the record is also not signed
by AOAO.
5
The original closing date set in the DROA was extended until
December 27, 1996.
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unit 3206 was never closed. The record does not contain a fully
executed contract between the Furuyas and AOAO for the purchase
of unit 3206 and/or the parking stalls. The Furuyas did not
fund the escrow account with payment of $28,756.85 for unit 3206
or $459,131.19 for the 106 parking stalls.
C. AOAO Retains Ownership of Unit 3206 and the Parking Stalls
and Negotiations Regarding Sale of the Leasehold Interest
in the Parking Stalls
The heart of the dispute in this case is whether there
was an enforceable contract for the purchase of the leased fee
interest in unit 3206 and the parking stalls, and whether
following the signing of the DROA, the Furuyas elected not to
purchase the leased fee interest in the parking stalls. The
record indicates—and the Circuit Court of the First Circuit
(circuit court) found—that very soon after the Furuyas signed
the DROA for unit 3206, they informed AOAO that they did not
want to purchase the leased fee interests in the parking stalls.
However, the Furuyas dispute this finding, and argue that AOAO
refused to close because it determined it wanted to control the
parking. The relevant evidence regarding this issue is
discussed herein.
Several AOAO representatives testified that well
before the closing date set on the DROA, December 9, 1996,
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Clarence Furuya (Furuya) informed AOAO Board members and Caesar
Paet (Paet), a consultant at Cadmus Properties hired by AOAO to
assist in the purchase of the leased fee interest from the
lessor, that he no longer wanted to purchase the leased fee
interest in the 106 parking stalls.6 James Dozier (Dozier), AOAO
treasurer, testified that “almost immediately Mr. Furuya
indicated he would buy the fee to both Units 3206 and 3207 but
would not buy the fee for the parking stalls.” Dozier also
testified that after Furuya indicated he did not want to
purchase the parking stalls the Board decided it would be in its
best interest to “buy the fee rather than sell it, to buy the
parking stalls rather than sell [them].” Henry Foil Craver
(Craver), an AOAO Board member, also testified that the Furuyas
indicated they did not wish to purchase the leased fee interest
in the parking stalls, and that he heard this information from
Dozier. Specifically, Craver stated that Dozier spoke to
Furuya, who told Dozier that he had “changed his mind and
decided he didn’t want to buy the fee” in the parking stalls.
Similarly, Paet testified that Furuya informed him that he no
longer wanted to buy the parking stalls, but he could not recall
the timeframe of this communication.
6
Prior to trial, the parties took several depositions and
designated portions of the testimony for trial. The deposition designation
testimony was received into evidence by the circuit court on June 24, 2009.
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AOAO representatives also testified that after signing
the DROA, the Furuyas informed AOAO that they wanted to sell the
leasehold interest to the 106 parking stalls to AOAO. Craver
testified that Furuya “decided that he wanted to sell the
parking stalls” and Paet stated that Furuya made an offer to
AOAO to sell the parking stalls. The record contains written
offers to sell the parking stalls to AOAO from Furuya’s agent.
On or around October 29, 1996—around two weeks after Furuya
signed the DROA—Jason Lum (Lum), Furuya’s real estate broker,
sent a written offer to AOAO to sell the Furuyas’ leasehold
interest to 81 parking stalls for $1,215,000. Around two weeks
later, on November 15, 1996, Lum sent a second written offer to
the Board to sell all 106 stalls to AOAO for $1,166,000, and
provided specific financing terms for the sale of the parking
stalls. At trial, however, Furuya disclaimed his involvement in
the written offers sent from Lum to AOAO and testified that he
never wanted to sell the parking stalls.7
The record indicates that because the Furuyas decided
not to purchase the leased fee interest in the parking stalls,
AOAO determined that it was in its interest to retain ownership
in the parking stalls and purchase the leasehold interest from
7
The circuit court found Furuya’s testimony not credible, as noted
infra.
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the Furuyas. To finance the purchase of the parking stalls,
AOAO issued a special assessment of $55 per month to all of the
apartment owners.
The Furuyas’ apparent decision not to purchase the
leased fee interest in the parking stalls, AOAO’s subsequent
decision to retain ownership of the parking stalls, and the
negotiations regarding the sale of the leasehold interest in the
parking stalls from the Furuyas to AOAO were memorialized in
internal and external AOAO documents. In a November 6, 1996
meeting, AOAO discussed “the parking owner’s decision not to
purchase the fee interest in the parking.” At the meeting,
Dozier reported that Furuya was interested in selling the
leasehold interest in 81 of the parking stalls to AOAO and
“recommended negotiating with the parking owner for the sale of
all the parking stalls.” On December 19, 1996, Galen Leong
(Leong), an attorney at Ashford & Wriston, LLP, wrote to Michael
Peitsch at Title Guaranty, regarding the Furuyas’ decision not
to purchase the parking stalls, noting, “[t]he owners of
Apartment 3206 have indicated that they wish to buy the leased
fee interest in Apartment 3206 but not the leased fee interest
in the parking stalls which are appurtenant to Apartment 3206.”
AOAO Board President, Elwin Stemig (Stemig), in a January 14,
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1997 letter to the condominium owners, explained the situation
regarding the parking stalls:
When the owners approved the [AOAO] Board’s decision to
purchase the fee interest to the land on which the Pacific
Monarch building rests, this also included purchasing the
fee interest for the 106 parking stalls in the parking
garage. Since the [AOAO] purchased the fee interest, the
owner of the 106 parking stalls has decided not to purchase
his fee interest from the [AOAO]. The cost to the [AOAO]
for the fee interest to the parking stalls was $422,000.
Thus the [AOAO] was faced with a decision as to whether to
retain the parking fee interest to the 106 parking stalls
or to sell it to an outside party. The Board made the
decision to retain the fee simple interest to the parking
stalls and set a goal to eventually purchase all the 106
parking stalls from the present owner and operate the
parking garage to generate extra income to the [AOAO]. At
this stage it became necessary for the Board to levy a
special assessment to payoff the extra expense of $422,000.
It will take approximately four years to payoff this debt.
At this time the owner of the 106 parking stalls in the
parking garage operates the garage and receives the revenue
therefrom but pays lease payments to the [AOAO] since the
[AOAO] now owns the fee interest to the 106 parking stalls.
The owner of the parking stalls has indicated an interest
in selling same [sic] to the [AOAO] since he did not choose
to buy the fee interest to the parking stalls. Thus the
Board intents [sic] to negotiate with the parking stalls
owner to buy the stalls sometime within the next year.
(Emphases added).
As noted by Stemig, and according to Furuya’s trial
testimony, Furuya started to pay lease rent to AOAO for the
parking stalls following AOAO’s purchase of the leased fee
interest in the parking stalls. Notably, according to Furuya’s
account summary provided by AOAO, Furuya also paid the $55 a
month assessment for the parking stalls between January 1, 1997
through December 31, 1999.
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D. Attempt to Separate the Interests in Unit 3206 and the
Parking Stalls
Following the Furuyas’ apparent decision not to
purchase the parking stalls, it appears that AOAO and the
Furuyas negotiated to separate the leased fee interests in unit
3206 and the parking stalls, in order to allow the Furuyas to
purchase the leased fee interest in unit 3206 only. In the
letter from Leong to Title Guaranty, referenced above, Leong
explains that selling the leased fee interest to unit 3206 and
not the leased fee interest to the parking stalls, without
separating them, would be impossible under the condominium
conveyance document because “[a]partment 3206 and the parking
stalls which constitute its limited common elements must be
treated as undivided parts of a whole.” Leong stated that the
parking stalls should be separated from the unit and proposed
different methods of accomplishing the separation. On March 27,
1997, Paet sent a fax to Alfred Hee, an attorney for AOAO,
informing him that Lum, the Furuyas’ broker, agreed to
separating the parking stalls from unit 3206. The document
noted that “[i]n order to convey the fee interest for unit
#3206, the parking stall interest must be separated from the
apartment.” In the document, AOAO indicated that it “[would]
handle the separation of interests at its’ [sic] expense.” A
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fax from Lum to Paet on March 31, 1997, provided that “Mr.
Furuya is in agreement to separate the apartment and parking
interest for unit 3206.”
E. Continued Negotiations Regarding the Parking Stalls and
2003-2004 Communications
Between 1997 and 2004, the record indicates that AOAO
and the Furuyas continued to negotiate AOAO’s purchase of the
leasehold interest in the parking stalls and the sale of the
leased fee interest in unit 3206 to the Furuyas. For example,
the Board’s December 18, 2000 and February 12, 2001 meeting
minutes note that the Board’s attorney was “in the process of
drawing up the legal paperwork for Clarence Furuya to sign to
swap the parking stalls” and that the attorney was “working on
the sale of the fee for unit 3206,” respectively. However, the
Furuyas and AOAO did not reach an agreement on either issue.
On September 11, 2003, Title Guaranty sent a letter to
the Furuyas noting that escrow for unit 3206 had been opened “on
or about October 21, 1996,” but that they had not “received the
seller’s signed contract” and had not been instructed to close
escrow. Approximately two months later, on December 1, 2003,
Furuya sent a letter to AOAO in order to complete the purchase
from AOAO of the leased fee interest in unit 3206 and the
parking stalls. Furuya claimed in the letter that he contracted
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with AOAO for the purchase of the leased fee interest in unit
3206, paid his deposit, and escrow had been opened for the unit.
He explained that escrow was never closed and AOAO refused to
allow him to purchase the leased fee interest for unit 3206 and
the parking stalls attached to the unit. Furuya then proposed
in the letter that AOAO allow him to purchase unit 3206 for
$28,756.85 and the parking stalls for $459,131.19, the original
pricing included in the 1996 DROA. In return, Furuya stated
that he would not pursue a cause of action against AOAO for
“willfully delaying the closing of escrow for unit 3206 and the
purchase of the fee interest of the parking stalls attached to
the unit.” He also stated that if AOAO pursued the purchase of
the leasehold interest in the parking stalls from the Furuyas,
it would cost AOAO over $2,000,000.
AOAO’s attorneys responded in a December 23, 2003
letter to Furuya and explained AOAO’s version of the events.
The letter stated that Furuya was “given the opportunity to buy
the leased fee interest” in the parking stalls in 1996, but that
he refused to buy the parking stalls and only wanted the leased
fee interest in units 3206 and 3207. According to AOAO’s
attorneys, the sale of unit 3206 was never finalized because
“the Association learned that the 106 parking stalls were
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attached to unit 3206 and if the Association sold [the Furuyas]
the leased fee interest to unit 3206” the Furuyas would in
effect be purchasing the leased fee interest to the 106 parking
stalls while only paying the cost of the leased fee interest for
unit 3206. AOAO stated in the letter that it investigated a
legal procedure to sever the 106 parking stalls from unit 3206
to enable the Furuyas to purchase only the leased fee interest
to unit 3206.
The letter also stated that AOAO expressed an interest
in purchasing from the Furuyas their leasehold interest in the
parking stalls and began negotiations to purchase the parking
stalls. The letter indicated that because the Furuyas countered
with a “much too high price,” AOAO continued to negotiate for
the purchase of the parking stalls and at that point also
negotiated to purchase unit 3206. The letter stated that after
three meetings, no agreement could be reached. According to
AOAO, at the last of the meetings, the Furuyas told AOAO that
they wanted to purchase the leased fee interest to the 106
parking stalls, and that at this time, AOAO informed the Furuyas
that they no longer wanted to sell the leased fee interest in
the parking stalls. AOAO informed the Furuyas that it continued
to be interested in purchasing the leasehold interest in the
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parking stalls “with or without unit 3206.”
On or around December 10, 2004, Furuya sent a letter
to Title Guaranty Escrow Services canceling the escrow for unit
3206 and requesting that his $1,000 deposit be returned.
F. Furuya’s Trial Testimony
On June 22, 2009, Furuya testified at trial as to his
understanding of the sale of the leased fee interest in unit
3206 and the parking stalls. He testified that he had been
ready to close on unit 3206 when Dozier informed him that AOAO
would not be able to close unit 3206 because it had to separate
the apartment from the parking stalls. Furuya testified that
Dozier told him not to be concerned about the closing date. He
stated that he could understand the need to separate the unit
from the parking stalls because otherwise, he would own the fee
in unit 3206 and the parking stalls while paying only for unit
3206. Furuya contended that later, AOAO approached him about
purchasing his leasehold interest in the parking stalls. Furuya
claimed that although Lum was his principal broker and
authorized to look for real estate deals for him, he did not ask
Lum to sell the leasehold interest to the parking stalls. He
maintained that he always intended to close on unit 3206 and the
parking stalls, but that he did not fund escrow because Dozier
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had informed him that they needed to separate the parking stalls
from the unit.
II. Procedural History
A. Circuit Court Proceedings
The Furuyas filed their initial complaint against AOAO
in June 2006. On November 30, 2007, the Furuyas filed their
first amended complaint (“Complaint” or “FAC”) alleging thirteen
counts against AOAO.8 Relevant here, the Furuyas alleged breach
of contract by AOAO seeking damages and specific performance;
promissory estoppel based on AOAO’s alleged promise to sell the
Furuyas the unit and parking stalls; and declaratory relief,
injunctive relief, and ultra vires actions, in relation to
AOAO’s retention of the leased fee interest in unit 3206. AOAO
8
The Furuyas asserted the following thirteen counts against AOAO
in their first amended complaint: Count I—breach of contract (relating to
AOAO’s refusal to sell the leased fee interest in unit 3206 and the parking
stalls to the Furuyas); Count II—specific performance; Count IV—injunctive
relief (seeking an injunction barring AOAO from selling the Furuyas’ interest
to a third party); Count V—declaratory judgment (seeking, among other things,
a declaration that the Furuyas “have no obligation to pay lease rent on the
parking stalls after 2014”); Count VI—promissory estoppel (claiming that the
Furuyas detrimentally relied on AOAO’s promises to convey the leased fee
interest to the Furuyas); Count VII—equitable estoppel (claiming that the
Furuyas detrimentally relied upon AOAO’s assurances that the Furuyas would be
entitled to purchase the leased fee interests and AOAO’s conduct in assisting
other apartment owners in purchasing their respective fee interests); Count
IX—ultra vires actions (claiming that AOAO does not have the right under the
declaration and bylaws “to hold and maintain parking stalls in its own name
in derogation of the rights of the individual unit owners”); Count X—unjust
enrichment (claiming that AOAO would be unjustly enriched if it were allowed
to retain the leased fee interest to unit 3206 and the parking stalls); and
Count XI—conversion (claiming that AOAO converted some of the parking
stalls).
Counts III, VIII, XII, and XIII were dismissed prior to trial.
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filed an answer to the Furuyas’ Complaint. In relevant part,
AOAO averred that the Furuyas and AOAO entered into negotiations
for the purchase by AOAO of the leasehold interest in the 106
parking stalls because the Furuyas only wanted to purchase the
leased fee interest to unit 3206, but not the 106 parking
stalls.
The case was tried without a jury. Prior to trial,
and as discussed supra, the parties conducted several
depositions, portions of which were stipulated into evidence at
trial. Furuya also testified at trial. On June 24, 2009, after
the Furuyas’ case-in-chief, AOAO moved the court for a directed
verdict pursuant to Hawaiʻi Rules of Civil Procedure (HRCP) Rule
41(b) (2009).9
The circuit court orally ruled that it would treat
AOAO’s motion as a motion to dismiss, and would therefore
consider the evidence in the light most favorable to the
nonmoving party, the Furuyas. The court concluded that the DROA
was not an enforceable contract and entered an order dismissing
the Furuyas’ breach of contract claims. The circuit court also
dismissed the Furuyas’ declaratory relief, injunctive relief,
9
HRCP Rule 41(b) is titled “Involuntary dismissal: Effect thereof”
and provides for dismissal “[f]or failure of the plaintiff to prosecute or to
comply with these rules or any order of court, a defendant may move for
dismissal of an action or of any claim against it.”
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ultra vires, promissory estoppel, and equitable estoppel claims
at this time. Of relevance here, the court noted that there was
no reasonable reliance on the part of the Furuyas to justify
their claims for promissory and equitable estoppel and that
AOAO’s actions did not justify the injunctive relief, ultra
vires, and declaratory relief claims.
The claims remaining from the Furuyas’ Complaint
related to 1) the Furuyas’ allegation that they did not have an
obligation to pay lease rent for the parking stalls after the
year 2014; and (2) the Furuyas’ unjust enrichment claim,
specifically, the Furuyas’ allegation that they were entitled to
damages for the alleged unauthorized use of two parking stalls
that were assigned as laundry facilities. Trial continued on
the foregoing issues, and the circuit court entered its Findings
of Fact and Conclusions of Law on March 2, 2010 (“March 2
FOF/COL”). The March 2 FOF/COL explicitly stated that the
Findings of Fact and Conclusions of Law related only to the
remaining claims from the Furuyas’ Complaint, namely whether the
Furuyas had an obligation to pay lease rent for the parking
stalls and whether the Furuyas were entitled to damages for
alleged unauthorized use of two of the parking stalls.
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B. The Furuyas’ Appeal to the ICA10
On appeal to the ICA, the Furuyas argued that the
circuit court failed “to find facts specifically and to state
conclusions separately as required by HRCP Rule 52 in granting
in part the AOAO’s HRCP Rule 41(b) motion.” The Furuyas argued
that the entire order failed to meet the standard of providing
findings and conclusions and thus, made it impossible to
determine what facts and law the trial court used in making its
“clearly erroneous decision.”
The Furuyas also maintained that the circuit court was
clearly erroneous in granting AOAO’s HRCP Rule 41(b) motion.
Relevant here, the Furuyas argued that the circuit court erred
in finding and concluding that the DROA was not an enforceable
contract. In this respect, the Furuyas claimed that the circuit
court’s findings that unit 3206 was offered to the Furuyas but
that the DROA did not constitute an enforceable contract were
“impossible to reconcile.” They maintained that the DROA was
AOAO’s offer, while the Furuyas’ execution and return of this
DROA constituted their acceptance. The Furuyas contended that
AOAO admitted in a deposition that the parties had “made the
10
AOAO cross-appealed. The only issue relevant on certiorari
included in AOAO’s cross-appeal involves its claim that the circuit court and
the ICA erred in concluding that the Furuyas owe no rent to AOAO for the
parking stalls after 2014. As noted supra, this issue is not addressed in
this opinion.
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deal,” and that AOAO admitted in its Answer to the Furuyas’
Complaint that it had accepted the DROA, escrow had opened, and
earnest money had been deposited. Relatedly, the Furuyas
claimed that AOAO’s Restated Bylaws required AOAO to sell unit
3206 to the Furuyas, and that AOAO had failed to do so. The
Furuyas also argued that any contention that there was no
“meeting of the minds” concerning the sale of the leased fee
interests to unit 3206 because the Furuyas refused to purchase
the leased fee interest to the parking stalls was without merit
and that they were ready, willing, and able to perform on the
contract. The Furuyas contended that there is no separate
leased fee interest for the 106 parking stalls because they are
limited common elements appurtenant to a unit; the parking
stalls were not themselves a unit.
As to the Furuyas’ declaratory relief, injunctive
relief, and ultra vires claims, the Furuyas argued that pursuant
to AOAO’s Restated Bylaws, AOAO was “required to sell the leased
fee” to the Furuyas and “[had] no authority to retain the leased
fee interest.” The Furuyas also claimed that the circuit court
erred in dismissing their promissory estoppel claim because all
of the elements of promissory estoppel had been satisfied.
AOAO argued the following in response to the Furuyas’
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breach of contract claim: (1) the Furuyas were not ready,
willing, and able to close on unit 3206; (2) the DROA was not an
enforceable contract; and (3) AOAO did not prevent the Furuyas
from closing. In addition, AOAO disputed the Furuyas’
contention that the 106 parking stalls did not have a leased fee
interest separate and apart from unit 3206. AOAO argued that
the 106 parking stalls are an undivided interest in the land
leased by the Furuyas separate and apart from their leasehold
interest in unit 3206.
As to the Furuyas’ injunctive relief, declaratory
relief, and ultra vires claims, AOAO argued that AOAO could
retain possession of the leased fee interest in the unit because
its actions were supported by the Bylaws and by statute. AOAO
also claimed that the Furuyas’ promissory estoppel claim was
correctly dismissed because the Furuyas voluntarily decided not
to close on the purchase of unit 3206.
C. The ICA’s Temporary Remand
On October 25, 2012, the ICA issued an order for
temporary remand to the circuit court. The ICA held that
pursuant to HRCP Rule 52(a) (2006), the circuit court was
required to support its partial dismissal order with findings of
fact and conclusions of law. The ICA further held that although
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the circuit court dismissed a number of the Furuyas’ claims
pursuant to HRCP Rule 41(b), the ruling should be considered to
be made pursuant to HRCP Rule 52(c). The ICA noted that
pursuant to HRCP Rule 52(c), “[i]f, as here, after a bench trial
where a party has been fully heard on an issue, the court enters
judgment as a matter of law, that judgment shall be supported by
findings of fact and conclusions of law.” The ICA thus
temporarily remanded the case to the circuit court for entry of
findings of fact and conclusions of law to support its dismissal
of the counts in the Furuyas’ Complaint.
D. The Circuit Court’s December 21, 2012 Findings of Fact and
Conclusions of Law
Pursuant to the ICA’s order for temporary remand, the
circuit court issued its Findings of Fact and Conclusions of Law
in support of its Order partially dismissing the following
counts alleged by the Furuyas in their Complaint: breach of
contract seeking damages and specific performance, injunctive
relief, declaratory relief, promissory estoppel, equitable
estoppel, ultra vires act, and conversion.
Regarding the breach of contract claim, the circuit
court determined that the DROA constituted an “offer” to AOAO
for the purchase of the leased fee interests to unit 3206 and
the appurtenant parking stalls; however, the circuit court found
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that the DROA was never signed by AOAO nor was it ever modified
or amended. The circuit court thus concluded that no
enforceable agreement existed between the Furuyas and AOAO as to
the sale of the leased fee interest in unit 3206 or the
appurtenant parking stalls because there was neither an
acceptance by AOAO of the written agreement for the unit or
stalls, nor was there a meeting of the minds as to the sale of
the unit and stalls.
The circuit court also determined that the Furuyas
decided not to purchase the leased fee interest in the parking
stalls soon after executing the DROA, and accordingly, did not
fund the escrow account with the payment for unit 3206 or the
parking stalls. The following Findings of Fact are relevant to
this issue:
54. The closing documents for Apartment Unit 3207 were
executed on or about December 13, 1996, and the deed was
recorded on December 27, 1996.
55. The FURUYAS did not fund the escrow account with the
payment of $28,756.85 for Apartment 3206.
56. The FURUYAS did not fund the escrow account with the
payment of $459,131.19 for the 106 Parking Stalls.
57. There is no sales contract for the FURUYAS[’] purchase
of the leased fee interest for the Apartment Unit 3206 and
the appurtenant 106 Parking Stalls.
58. CLARENCE FURUYA did not ask for an extension of the
closing date for the purchase of the leased fee interests
for Apartment 3206 or the 106 Parking Stalls.
59. Shortly after executing the DROAs, the FURUYAS decided
that they did not want to purchase the leased fee interests
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to the 106 Parking Stalls.
60. Well before the December 9, 1996, closing date,
CLARENCE FURUYA informed the AOAO’s Board members and its
Lease-to-Fee Conversion Consultant, Caesar Paet, that the
FURUYAS no longer wanted to acquire the leased fee interest
to the 106 Parking Stalls.
61. Because of the FURUYAS[’] decision to not purchase of
[sic] the leased fee interest to the Parking Stalls and
decision to sell the Parking Stalls to the AOAO, there was
no closing on the sale of the leased fee interests to
Apartment 3206 or the 106 Parking Stalls to the FURUYAS.
62. CLARENCE FURUYA did not request Title Guaranty to keep
escrow opened so he could complete the purchase of the
leased fee interest.
. . . .
77. After the FURUYAS decided that they did not want to
acquire the leased fee interest in the 106 Parking Stalls,
CLARENCE FURUYA informed several [of] AOAO’s Board members
and Ceasar [sic] Paet that he wanted to sell the leasehold
interest to the 106 Parking Stalls to the AOAO.
78. The FURUYAS’ decision to not close on the purchase of
the leased fee interests was reported to other third-
parties evaluating to sale [sic] of the leasehold interests
to the Parking Stalls. Attorney Galen Leong of Ashford &
Wriston wrote to Michael Peitsch at Title Guaranty of
Hawaiʻi about the FURUYAS’ decision not to purchase of [sic]
the leased fee interests for Apartment Unit 3206 and the
appurtenant 106 Parking Stalls.
79. The FURUYAS informed the AOAO that they wanted to sell
the leasehold interest to the 106 Parking Stalls to the
AOAO.
. . . .
86. On or about October 29, 1996, the FURUYAS submitted a
written offer to the AOAO to sell to it the leasehold
interest to 81 parking stalls for $1,216,000 [sic].
87. The [] written offer to the AOAO to sell the leasehold
interest to 81 parking stalls for $1,216,000 [sic] to the
AOAO was prepared and sent by the FURUYAS’ princip[al] real
estate broker, Jason Lum.
. . . .
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91. Lum had no independent authority to offer to sell or to
sell or to negotiate to sell any of CLARENCE FURUYA’s
properties.
. . . .
93. As reflected in the minutes of the November 1996 Board
of Directors’ meeting, the written offer by CLARENCE FURUYA
was considered and discussed by the AOAO’s Board:
There was a discussion over the parking owner’s
decision not to purchase the fee interest in
the parking. Jim Dozier noted that the parking
owner is interested in selling 81 of the
parking stall [sic] to the AOAO. Jim
recommended negotiating with the parking owner
for the sale of all the parking stalls. . .
There was further discussion over the AOAO
holding on to the fee simple title in the
parking stall and extensive discussion over
financing of the purchase of the AOAO’s
reserves rather than including it in the AOAO’s
bank loan. . . .
94. On or about November 15, 1996, CLARENCE FURUYA
submitted another written offer to the AOAO for the sale of
all 106 Parking Stalls to the AOAO for $1,166,000.
95. This November 15, 1996 offer to sell all 106 Parking
Stalls to the AOAO provided specific financing terms for
the sale of the Parking Stalls.
96. CLARENCE FURUYA’s trial testimony that he had nothing
to do with the written offers to sell the 106 Parking
Stalls and he “absolutely did not offer to sell the parking
stalls to the AOAO” is not credible.
(Record citations omitted).
The circuit court also concluded in its Findings of
Fact that “[a]ny delay in [the] closing of Apartment Unit 3206
was not caused by the AOAO’s failure to take steps to separate
the leasehold interest in the 106 Parking Stalls from the
leasehold interest in the Apartment Unit 3206” and relatedly,
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that “[t]he separation discussion was not the reason that
prevented the FURUYAS from closing on the sale of the leased fee
interests to the apartment unit and the Parking Stalls.”
The circuit court entered the following related
Conclusions of Law:
15. There was no acceptance by the AOAO of an [sic] written
agreement for the sale of the leased fee interests in the
106 Parking Stalls after the FURUAYS [sic] decided not to
purchase the leased fee interest to the 106 Parking Stalls
and decided not to close on the purchase of the leased fee
interests for Apartment Unit 3206 and the 106 Parking
Stalls.
16. There was no meeting of the minds between Plaintiffs
and the AOAO as to the sale of the leased fee interests for
the Apartment Unit 3206 and the Parking Stalls.
17. “[I]f a promisor himself is the cause of the failure of
performance * * * of a condition upon which his own
liability depends, he cannot take advantage of the
failure. . . . [N]o one can avail himself of the non-
performance of a condition precedent, who has himself
occasioned its non-performance. . . . The doctrine is
purely one of waiver. . . .” See Ikeoka v. Kong, 47 Haw.
220, 228[,] [386 P.2d 855, 860] (1963).
18. The DROA for Unit 3206 did not create a contract with
the AOAO for the purchase of the leased fee interests to
the 106 Parking Stalls.
19. The DROA for Unit 3206 executed by CLARENCE FURUYA is
not an enforceable agreement against the AOAO for the
purchase of the leased fee interests to Apartment Unit 3206
and the appurtenant 106 Parking Stalls.
20. There was no meeting of the minds between the FURUYAS
and the AOAO as to the FURUYAS[’] purchase of the leased
fee interests to the Apartment Unit 3206 and the
appurtenant 106 Parking Stalls.
. . . .
27. The termination of the escrow for the DROA by the
FURUYAS effectively terminated any alleged offer for the
purchase of the leased fee interests in the Apartment Unit
3206 and the Parking Stalls.
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. . . .
30. The “failure by the party seeking to establish the
enforceability in equity of a contemplated contract, to
show his ability, readiness and willingness to perform
essential acts required or obligations incurred therein,
reflects in itself a fundamental lack of mutuality.”
Molokai Ranch v. Morris, [36 Haw. 219, 228 (Haw. Terr.
1942)].
31. The maxim “He who seeks equity must do equity,” bars
the FURUYAS’ request for specific performance. See 2 A.
Corbin, Corbin on Contracts § 310 at 44 (1950 & Supp.
1992[)] (“[I]t is well-recognized that []no [person] should
profit by his [or her] own wrong.”); Adair v. Hustace, 64
Haw. 314, 320[,] [640 P.2d 294, 300 (1982)] (The doctrine
of laches reflects the equitable maxim that “equity aids
the vigilant, not those who slumber on their rights.” []).
(Record citations omitted).
With respect to the remaining claims addressed in the
circuit court’s December 21, 2012 Findings of Fact and
Conclusions of Law, the court held as follows: 1) the Furuyas
could not recover based on their promissory estoppel or
equitable estoppel claims because there was no reasonable
reliance; 2) the Furuyas’ injunctive relief, declaratory relief,
and ultra vires act claims failed because AOAO acted within its
authority by retaining the leased fee interests in the unit and
the parking stalls, and there was no enforceable agreement.
E. Supplemental Briefs to the ICA
The Furuyas and AOAO submitted supplemental briefing
to the ICA regarding the circuit court’s December 21, 2012
Findings of Fact and Conclusions of Law. The parties in large
part reiterated the arguments in their original briefings to the
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ICA. The Furuyas and AOAO continued to dispute the following
issues: (1) the existence of an enforceable contract for the
leased fee interest for unit 3206 and the appurtenant 106
parking stalls; (2) whether the parking stalls had a leased fee
interest separate and apart from the leased fee interest of unit
3206; and (3) AOAO’s obligation to sell unit 3206 and the
parking stalls pursuant to its governing documents.
F. ICA Memorandum Opinion
The ICA held that the circuit court did not err in
concluding there was no enforceable contract between AOAO and
the Furuyas for the purchase of the leased fee interests
associated with unit 3206 and the parking stalls. Furuya v.
Ass’n of Apartment Owners of Pac. Monarch, Inc., No. 30485, at
18-21 (App. Apr. 25, 2014) (mem.). According to the ICA, under
the plain language of the DROA, Furuya was making an offer that
AOAO “would ultimately have to accept” to create a binding
contract. Id. at 19. The ICA found that AOAO had not signed
the DROA on the designated acceptance line of the document;
therefore, the circuit court had not erred in concluding that
the DROA for unit 3206 was not a binding contract. Id. The ICA
also rejected the Furuyas’ claim that AOAO admitted acceptance
of the offer in previous pleadings, determining that the Furuyas
waived the argument because it was not raised below and the
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issue of whether the contract was enforceable was disputed at
trial. Id. at 21.
As to the Furuyas’ injunctive relief, declaratory
relief, and ultra vires claims, the ICA determined that the
circuit court did not err in dismissing the claims because
AOAO’s Restated Bylaws did not require “the AOAO to offer, or to
not retain, the leased fee interest.” Id. at 22. The ICA held
that the Furuyas’ promissory estoppel claim was properly
dismissed by the circuit court for lack of “reasonable reliance
by the Furuyas on any promise by the AOAO.” Id. at 23.
III. Standard of Review
A. Order Granting Partial Dismissal Pursuant to HRCP Rule
52(c)
The ICA concluded in its order for temporary remand to
the circuit court that although the circuit court dismissed
several of the Furuyas’ claims pursuant to HRCP Rule 41(b), the
ruling should be considered made pursuant to HRCP Rule 52(c).
The parties do not dispute the ICA’s determination.
As the ICA determined, “[w]here we have patterned a
rule of procedure after an equivalent rule within the FRCP
[Federal Rules of Civil Procedure], interpretations of the rule
by the federal courts are deemed to be highly persuasive in the
reasoning of this court.” Furuya, mem. op. at 10 (quoting
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Kawamata Farms, Inc. v. United Agri Prods., 86 Hawaiʻi 214, 251–
52, 948 P.2d 1055, 1092–93 (1997)). HRCP Rule 52(c) was modeled
after FRCP Rule 52(c). See Hawaii Rules Committee, Proposed
Red-Line Rules and Commentary to the Hawaii Rules of Civil
Procedure, Rules Committee Notes to Rules 41 and 52 (July 23,
1997). The United States Court of Appeals for the Ninth Circuit
has held that “[i]n reviewing the district court’s judgment
entered under Rule 52(c), we review its findings of fact for
clear error and its conclusions of law de novo.” United Steel
Workers Local 12-369 v. United Steel Workers Int’l, 728 F.3d
1107, 1114 (9th Cir. 2013). The court also noted that “in the
context of a bench trial . . . ‘[i]f the district court’s
account of the evidence is plausible in light of the record
reviewed in its entirety, [we] may not reverse it even though
convinced that had [we] been sitting as the trier of fact, [we]
would have weighed the evidence differently.’” Id. (alteration
in original) (citation omitted).
B. Findings of Fact and Conclusions of Law
A finding of fact is clearly erroneous “when the
record lacks substantial evidence to support the finding” or
when “despite evidence to support the finding, the appellate
court is left with the definite and firm conviction in reviewing
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the entire evidence that a mistake has been committed.” Bhakta
v. Cty. of Maui, 109 Hawaiʻi 198, 208, 124 P.3d 943, 953 (2005)
(citation omitted). Conclusions of law are reviewed under the
right/wrong standard. Estate of Klink ex rel. Klink v. State,
113 Hawaiʻi 332, 351, 152 P.3d 504, 523 (2007). A conclusion of
law that presents a mixed question of law and fact is reviewed
under the clearly erroneous standard. Id.
IV. Discussion
On certiorari, the Furuyas maintain their position
that the DROA constituted an enforceable contract for the
purchase of unit 3206 and the 106 parking stalls. The Furuyas
additionally argue that the ICA gravely erred by sua sponte
determining that AOAO’s Bylaws did not require that AOAO offer
the leased fee interest to the lessees; concluding that the
Furuyas waived their argument that AOAO admitted there was a
contract; and affirming the circuit court’s promissory estoppel
ruling. In response, AOAO claims that there was no enforceable
contract because AOAO never “accepted” the DROA; AOAO’s
possession of the leased fee interests is not prohibited by the
Bylaws; and there was substantial evidence to support dismissal
of the promissory estoppel claim.
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A. Breach of Contract Claims
The main issue on appeal relates to the Furuyas’
claims for specific performance and damages based on their
contention that AOAO breached the DROA by failing to sell the
Furuyas unit 3206 and the parking stalls. Throughout the
litigation, the Furuyas have maintained that the DROA for unit
3206 sent to the Furuyas constituted an offer; the Furuyas’
signature of the DROA constituted acceptance; and AOAO breached
the contract by refusing to sell the Furuyas the leased fee
interest in unit 3206 and the parking stalls. The circuit court
rejected the Furuyas’ argument, concluding that the DROA did not
create “an enforceable agreement against the AOAO for the
purchase of the leased fee interests to Apartment Unit 3206 and
the appurtenant 106 Parking Stalls.” The ICA agreed with the
circuit court, determining that the court did not err in finding
that AOAO “did not accept the DROA” and “in finding that the
Furuyas unsuccessfully attempted to purchase the fee interest
for 3206 without the parking stalls.” Furuya, mem. op. at 19.
The circuit court also noted in its Conclusions of
Law, however, that “[i]f a promisor himself is the cause of the
failure of performance [] of a condition upon which his own
liability depends, he cannot take advantage of the failure” and
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a party seeking equity for a breach of contract claim must
demonstrate “ability, readiness and willingness to perform.”
Relatedly, the court determined that “[t]he maxim ‘[h]e who
seeks equity must do equity,’ bars the FURUYAS’ request for
specific performance.” (Citations omitted). As intimated by
the circuit court, whether or not there was a valid and
enforceable contract, specific performance will not be granted
where the party fails to demonstrate that he or she was ready,
willing, and able to perform on the contract throughout the
contract term; and a party seeking damages cannot recover where
the party is responsible for the breach. Here, in its Findings
of Fact, the circuit court determined that the Furuyas decided
not to purchase the leased fee interest to the parking stalls
and that because of this decision, the DROA for apartment unit
3206 and the parking stalls never closed. The circuit court’s
findings are supported by substantial evidence and are not
clearly erroneous. Thus, notwithstanding the Furuyas’ claim
that the DROA constituted an enforceable contract for unit 3206
and the parking stalls, their claims are barred because,
pursuant to the circuit court’s findings, their decision not to
purchase the parking stalls after executing the DROA
demonstrated that they were not ready, willing, and able to
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perform on the contract; and relatedly, the Furuyas were
responsible for the failure of the DROA to close. Because the
circuit court’s findings in this regard were not clearly
erroneous, the circuit court did not err in rejecting Furuyas’
breach of contract claims.
It is a well-established principle of contract law,
and recognized in our jurisdiction, that when seeking specific
performance for a contract involving land, “to obtain relief,
plaintiffs must show that they were ready, willing, and able to
perform their obligations.” 71 Am. Jur. 2d Specific Performance
§ 131 (2015); see also Kalinowski v. Yeh, 9 Haw. App. 473, 478-
79, 847 P.2d 673, 677 (1993) (noting that purchasers were ready,
willing, and able to perform all their obligations in affirming
the circuit court’s granting of specific performance on a
condominium sale). “A failure, inability, or refusal to carry
out the terms of a contract at the time when performance is due
will ordinarily be grounds for refusing specific performance.”
81A C.J.S. Specific Performance § 80 (2015) (emphasis added).11
Thus, in PR Pension Fund v. Nakada, 8 Haw. App. 480,
11
Determinations of whether a party is ready, willing, and able to
perform in this context frequently depend on the purchaser’s ability or
“financial capability” to make the required payments, because “the
willingness of the purchaser is seldom in dispute.” 69 Am. Jur. 3d Proof of
Facts 99, § 1 (2002). However, here, the Furuyas’ willingness was in
dispute, and the circuit court specifically determined that the DROA did not
close because the Furuyas decided not to purchase the parking stalls.
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490, 809 P.2d 1139, 1145 (1991), in a claim for specific
performance of a sale of land through a DROA, the court held the
circuit court abused its discretion in granting specific
performance, because the plaintiff “failed to prove that
Plaintiff was ready, willing, and able to timely close.” The
court noted that
[w]here a purchaser seeks specific performance of a land
purchase contract, the general rule provides that he must
show that (1) he paid the purchase price or tendered it to
the seller or (2) he has a good excuse for his failure to
so pay or tender and has the readiness, willingness, and
ability to pay.
Id. at 488-89, 809 P.2d at 1144-45 (emphasis added). Based on
the facts of the case, the court concluded that there was no
evidence from which the trial court could conclude the
“Plaintiff’s ability to pay the purchase price.” Id. at 489,
809 P.2d at 1145. In so holding, the court contrasted other
cases in which readiness, willingness, and ability to perform
were not an issue, because the entirety of the purchase price
had been deposited in escrow. Id. at 490-91, 809 P.2d at 1145-
46.
Here, the Furuyas never tendered performance, that is,
they did not deposit the required funds in escrow to close on
the purchase of unit 3206 and the parking stalls ($28,756.85 for
the unit plus $459,131.19 for the parking stalls). Thus, in
order to maintain their claim for specific performance, the
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Furuyas had to prove that they were ready, willing, and able to
perform throughout the contract term. However, the circuit
court found that the Furuyas were not willing to perform during
the contract term, specifically noting that “[s]hortly after
executing the DROAs, the FURUYAS decided that they did not want
to purchase the leased fee interests to the 106 Parking Stalls”
and that “[b]ecause of [their] decision” not to purchase the
parking stalls, “there was no closing on the sale of the leased
fee interests to Apartment 3206 or the 106 Parking Stalls to the
FURUYAS.”
The circuit court’s finding that the deal failed to
close because of the Furuyas’ decision not to purchase the
parking stalls was supported by substantial evidence in the
record. As discussed supra, testimony from AOAO’s Board members
indicated that Furuya informed the Board, as well as AOAO’s
consultant, Paet, that he no longer wanted to purchase the
parking stalls and instead, the Furuyas wanted to sell the
leasehold interests in the parking stalls to AOAO. In this
vein, the Furuyas’ broker, Lum, sent two written offers to AOAO
to sell their leasehold interest to the parking stalls to AOAO.
The circuit court’s conclusion that the Furuyas decided not to
purchase the parking stalls is also supported by documentary
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evidence in the record. In particular, the Board’s November 6,
1996 meeting minutes memorialized the Furuyas’ “decision not to
purchase the fee interest in the parking”; a letter from AOAO’s
attorneys to Title Guaranty noted that the Furuyas wanted to
purchase “the leased fee interest in Apartment 3206 but not the
leased fee interest in the parking stalls”; and a letter from
the President of the Board to AOAO condominium owners indicated
that “the owner of the 106 parking stalls has decided not to
purchase his fee interest from the [AOAO].”
The Furuyas claim that they were ready, willing, and
able to close on the purchase of unit 3206 and that the reason
the DROA did not close was that AOAO wanted to “control the
parking” and realized that it could not sell unit 3206 without
selling the appurtenant stalls. In support, they cite to 1) the
2004 letter from AOAO’s attorneys to the Furuyas in which,
according to the Furuyas, “[t]he attorney confirmed that it was
the AOAO that refused to close the sale”; 2) Craver’s deposition
testimony that after the Furuyas decided not to close on unit
3206, AOAO realized that the apartment would have to be
separated from the parking stalls; and 3) Furuya’s testimony
that he was ready to deposit the funds in escrow and that the
reason he did not do so was that the parking stalls had to be
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separated from the unit. However, the 2004 letter and Craver’s
testimony appear to address the actions that took place after
the Furuyas decided not to purchase the leased fee interest in
the parking stalls, during the period when the parties
negotiated to attempt to separate the interests in the unit from
the interest in the parking stalls. In addition, despite
Furuya’s testimony that he did not deposit funds in escrow
because the parking stalls needed to be separate from the unit,
the circuit court made a finding that the issue of separating
the parking stalls from the apartment “was not the reason that
prevented the FURUYAS from closing on the sale of the leased fee
interests to the apartment unit and the Parking Stalls.” Based
on the evidence in the record, this finding was not clearly
erroneous. Moreover, the circuit court’s determination was
based on its assessment of witness credibility, which we will
not second guess on appeal. See, e.g., Tamashiro v. Control
Specialist, Inc., 97 Hawaiʻi 86, 92, 34 P.3d 16, 22 (2001)
(“[T]he credibility of witnesses and the weight to be given
their testimony are within the province of the trier of fact
and, generally, will not be disturbed on appeal.”).
The circuit court’s denial of the Furuyas’ breach of
contract claim is further supported by the principle that “a
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party who breaches or causes the other party to breach an
agreement cannot enforce the agreement to his or her benefit.”
Stanford Carr Dev. Corp. v. Unity House, Inc., 111 Hawaiʻi 286,
300, 141 P.3d 459, 473 (2006); see also PR Pension Fund, 8 Haw.
App. at 491, 809 P.2d at 1146 (noting “a party cannot recover
for a breach of contract if he fails to comply with the contract
himself” (citation omitted)); cf. Kahili, Inc. v. Yamamoto, 54
Haw. 267, 272, 506 P.2d 9, 12 (1973) (“The general rule is that
where a person by his own act makes impossible the performance
or the happening of a condition such nonperformance should not
relieve him from his obligation under a contract.”); Kalinowski,
9 Haw. App. at 478-79, 847 P.2d at 677 (“[N]o person can defend
against contractual liability on grounds of a condition
precedent when he [or she] is responsible for that condition
precedent not being complied with.” (second alteration in
original) (citation omitted)). In other words, if a party is
responsible for another party’s lack of performance, he or she
cannot successfully assert a breach of contract claim for
damages.
In sum, because—based on the circuit court’s
findings—the Furuyas failed to demonstrate they were ready,
willing, and able to perform on the contract throughout the
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contract term, their claim for specific performance fails.
Similarly, because the circuit court found that the Furuyas were
responsible for the failure of the DROA to close, they cannot
prevail on their claim for damages. The fact that the Furuyas
came forward in 2004, approximately seven years after the
initial closing date of the DROA, and stated that they were
ready to close on the DROA and that they had always wanted to
purchase the leased fee interest in unit 3206 along with the
appurtenant stalls was considered and rejected by the circuit
court. Substantial evidence in the record supports the circuit
court’s conclusion that prior to the closing of the DROA, the
Furuyas changed their minds and were not prepared to pay the
$459,131.19 for the parking stalls. Accordingly, the Furuyas
have failed to demonstrate error in the circuit court’s
decision.12
B. Declaratory Relief, Injunctive Relief, and Ultra Vires
Claims
The Furuyas additionally claim that the ICA gravely
erred by determining that the Restated Bylaws did not require
12
As noted supra, the Furuyas argue that there was no separate
leased fee interest in unit 3206 and the parking stalls. This argument has
no bearing on our conclusion that the Furuyas’ claims must fail because they
decided not to purchase the parking stalls. Even assuming the Furuyas are
correct, their decision not to purchase the parking stalls demonstrated that
they were not willing to follow through with the alleged contract, because
based on the Furuyas’ argument, the DROA for unit 3206 included the
appurtenant parking stalls.
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AOAO to sell the leased fee interests acquired from the lessor
to the condominium unit owners. The Furuyas argue that if
AOAO’s sending of the DROA to the Furuyas did not constitute an
offer, as the ICA held, AOAO never made them an offer to
purchase unit 3206, resulting in a violation of the Restated
Bylaws. On this basis, the Furuyas maintain that the circuit
court’s dismissal of its declaratory relief, injunctive relief,
and ultra vires claims should be vacated. In response, AOAO
reasserts its earlier argument that AOAO’s possession of the
leased fee interest is not prohibited by its Bylaws or by
statute.
Pursuant to Article III, Section 2 of the Restated
Bylaws, the Board of Directors “shall have the powers and duties
necessary for the administration of the affairs of the
Association and may do all acts and things except such as by
law, the Declaration or these Bylaws may not be delegated to the
Board of Directors by the Apartment Owners.” The Restated
Bylaws state in relevant part:
Such powers and duties of the Board of Directors shall
include, but shall not be limited to, the following:
. . . .
(m) Purchasing or leasing or otherwise acquiring in the
name of the Board of Directors or its nominee, corporate or
otherwise, on behalf of all Apartment Owners, any
apartments;
. . . .
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(s) Implementation of the Acquisition of the Leased Fee
Interest in the Land from Lessor.
The Board of Directors shall be authorized and have
the power to do all things it deems necessary to enable the
Lessor and/or its successors or assigns of the leased fee
interest in the land (Lessor) to sell that interest to the
Association and/or its members. The Board on behalf of the
Association shall be authorized to purchase all or any
portion of the Leased Fee interest in the land from the
Lessor and is expressly authorized to transact any and all
other matters relating to the acquisition specifically but
not limited to the following:
. . . .
5. To sell the leased fee interest in the land
involving the appurtenant apartment or commercial units,
first to the Lessee of the appurtenant apartment or
commercial unit and if the leased fee interest in the land
is unsold, then to any interested Lessee in the Association
or other interested third party by any equitable method of
sale as determined in the sole discretion of the Board.
. . . .
7. To incorporate the Association and/or create a
Trust to hold title to the leased fee interest in the land
so acquired where it is deemed necessary and in the best
interest of the Association.
. . . .
In the event that the Association acquires all or any
portion of the Leased Fee Interest in the land, the Board
of Directors shall be empowered to take all such action as
it deems necessary or appropriate to administer the
interest so acquired . . . .
The plain language of the Bylaws provide that AOAO can
purchase or lease apartments in the name of the Board and has
the power and authority “to hold title to the leased fee
interest” if “necessary and in the best interest” of AOAO.
Here, as discussed supra, the circuit court determined that the
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sale of unit 3206 failed to close because of the Furuyas’
decision not to purchase the parking stalls, and after this
decision, the Board decided it would be in its best interest to
retain the leased fee in the parking stalls. On this basis, the
circuit court determined that AOAO acted “[p]ursuant to [its]
authority and power.” The circuit court further noted: “Nothing
in the By-Laws . . . states that the association of apartment
owners ‘must’ or ‘can only’ sell to the lessee after the lessee
declines to purchase their leased fee interest when it is
initially offered by the homeowners’ association.” We agree.
Based on the circuit court’s finding that the Furuyas decided
not to purchase their leased fee interest, and the language of
the Bylaws, the circuit court’s determination was not
erroneous.13 Accordingly, the circuit court did not err in
rejecting the Furuyas’ related claims for injunctive relief,
declaratory relief, and ultra vires act.
C. Promissory Estoppel Claim
Finally, the Furuyas argue that the ICA gravely erred
in holding that the circuit court properly dismissed their
13
Because we determine that the circuit court did not err based on
its determination that the Furuyas chose not to purchase their leased fee
interest, we need not determine whether the ICA gravely erred in holding that
the Bylaws did not require AOAO to sell the leased fee interest “at all.”
Furuya, mem. op. at 20. We additionally note that the Furuyas have failed to
demonstrate that AOAO’s retention of the leased fee interest resulted in a
violation of Hawaiʻi Revised Statutes chapter 514C (1993).
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promissory estoppel claim. The Furuyas claim that the circuit
court’s justification for dismissing their promissory estoppel
claim was inconsistent with the ICA’s determination “that no
offer was made” by AOAO to sell the parking stalls.
Notwithstanding the ICA’s decision, the circuit court’s
determination that the Furuyas’ reliance was not reasonable was
not clearly erroneous, and thus, the court properly rejected the
Furuyas’ claim for promissory estoppel.
In Ravelo v. County of Hawaiʻi, 66 Haw. 194, 201, 658
P.2d 883, 887–88 (1983), this court expressly adopted section 90
of the Restatement (Second) of Contracts (1979), which
articulates the doctrine of promissory estoppel as a “Promise
Reasonably Inducing Action or Forbearance.” The elements of
promissory estoppel include: (1) a promise; (2) at the time the
promisor made the promise, the promisor must “foresee that the
promisee would rely upon the promise (foreseeability)”; (3)
“[t]he promisee does in fact rely upon the promisor’s promise”;
and (4) “[e]nforcement of the promise is necessary to avoid
injustice.” Applications of Herrick, 82 Hawaiʻi 329, 337-38,
922 P.2d 942, 950-51 (1996). We have also noted that “[t]he
‘essence’ of promissory estoppel is ‘detrimental reliance on a
promise.’” Gonsalves v. Nissan Motor Corp., 100 Hawaiʻi 149,
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165, 58 P.3d 1196, 1212 (2002) (quoting Ravelo, 66 Haw. at 199,
658 P.2d at 887). Pursuant to the commentary of the
Restatement, the reasonableness of the promisee’s reliance on
the promise is also relevant. Specifically, the commentary
notes that a determination as to whether enforcement of the
promise is “necessary to avoid injustice . . . may depend on the
reasonableness of the promisee’s reliance.” Restatement
(Second) of Contracts § 90 cmt. b (1981).
In the instant case, the circuit court determined that
the Furuyas’ reliance on the DROA or other “alleged statements”
by AOAO was unreasonable given that, inter alia, the Furuyas
“voluntarily decided not to purchase the leased fee interest to
the Parking Stalls.” On this basis, the circuit court dismissed
the Furuyas’ promissory estoppel claim. The circuit court’s
findings related to the Furuyas’ decision not to purchase the
parking stalls, discussed supra, support its conclusion. Put
another way, once the Furuyas decided not to purchase the
parking stalls, they could no longer reasonably rely on any
alleged promise by AOAO to sell the leased fee interest in unit
3206 and/or in the parking stalls. Relatedly, enforcing any
alleged promise made by AOAO would not be necessary to avoid
injustice, because—based on the circuit court’s findings—the
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Furuyas were responsible for the outcome of which they now
complain. Accordingly, the circuit court properly rejected the
Furuyas’ promissory estoppel claim.14
V. Conclusion
For the foregoing reasons, we affirm the ICA’s May 30,
2014 Judgment on Appeal.
George W. Van Buren, /s/ Mark E. Recktenwald
and John B. Shimizu
for petitioners-respondents /s/ Paula A. Nakayama
Matt A. Tsukazaki /s/ Sabrina S. McKenna
for respondent-petitioner
/s/ Richard W. Pollack
/s/ Michael D. Wilson
14
The Furuyas also raised a claim of equitable estoppel in their
initial complaint, however, no argument on this claim was raised in their
application for writ of certiorari.
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