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Robert E. Keown v. Tudor Insurance Company

August 17, 2012





(By: Foley, Presiding Judge, Fujise and Leonard, JJ.)

Plaintiff-Apellant Robert E. Keown (Keown) appeals from the judgment entered February 10, 2009, in the Circuit Court for the Fifth Circuit (circuit court) *fn1 granting summary judgment in favor of Defendant-Appellee Tudor Insurance Company (Tudor).

At all times relevant to this appeal, Keown was a real estate agent and owner of a real estate brokerage firm (Bob Keown Ltd., d/b/a Makai Properties) that he began in or around 1980 and sold on May 18, 2005. Keown maintained a professional liability insurance policy (policy) with Tudor from December 15, 2003 through February 15, 2005. Keown was one of several unpaid directors of the Koloa Early School (the School), a non-profit entity in Kauai. The School operated on land it subleased from Honpa Hongwanji Mission of Hawaii (Honpa), a non-profit entity that operated a Buddhist temple and supervised the Koloa

Hongwanji Mission (Koloa), an affiliated temple which occupied the land and buildings on the property leased by Honpa.

In 2003, an opportunity to purchase the leased property occupied by the School and Koloa (the property) arose and the School agreed to jointly purchase the property with Honpa and later subdivide it with Honpa. Honpa, rather than Koloa, was to be the named co-purchaser alongside the School. As Keown described his role in the transaction he "handled many of the details" on behalf of both the School and Honpa, including arranging for an appraisal and a survey of the property, researching land division options, working with county officials, preparing and submitting the Deposit Receipt Offer and Acceptance (DROA) to the sellers, listing his real estate company as broker, and being "the 'person on point' concerning the property acquisition."

Keown prepared the draft DROA, which Honpa and the

School executed as joint purchasers in April 2003, without having an agreement in place as to how the property would be divided. Despite the inability to reach agreement on co-tenancy structure and division of the property, Honpa and the School agreed to close the sale. The deed conveyed an undivided one-half interest to the School and an undivided one-half interest to Honpa. Unbeknownst to Honpa or Koloa, Keown also recorded a mortgage for himself as mortgagee of an undivided one-half interest in the property to secure a $230,000 loan he made to the School to finance its purchase of the school building and the land under it. Following closing and recordation of the deed, efforts to reach an agreement on division of the property remained unsuccessful.

In January 2005, approximately one year after closing, Honpa filed a complaint against the School and Keown seeking partition of the property and making a claim against Keown for negligence.

Honpa alleged that (1) the School had agreed that the School would only obtain that portion of the property underlying the school building and that Honpa would acquire the rest of the property; (2) Keown, acting as "Principal Broker/Broker-in- Charge" represented both Honpa and the School and drafted the DROA for the property but told both buyers that the DROA was "simply a formality" and the details of the division and ownership of the property would be documented later; (3) as the parties did not reach an agreement as to the property division, the Warranty Deed recording the purchase stated that the 50% undivided interests specified therein would not bind either party; (4) Keown recorded a mortgage "which identifies Keown is [sic] a mortgagee of an undivided one-half (½) interest" in the property without disclosing this to Honpa; and (5) Keown breached his duty of care to Honpa causing damage to Honpa by, among other things, causing it to be in dispute with the School over the ownership of the property.

In addition to a partition of the property, the complaint sought monetary damages and attorneys' fees and costs. In February 2005, Keown tendered the complaint to Tudor through his attorney. Tudor responded with a rejection letter, denying coverage based on exclusions contained in the policy. Tudor specifically relied on the following clauses in the policy's enumerated exclusions and provisions of the Real Estate Agents and Brokers Endorsement:

III. Exclusions

Coverage provided in this policy does not apply to any loss*fn2 in connection with or arising out of or in any way involving:

G. Actions against the Insured arising out of or connected with the performance or failure to perform ...

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