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Scudder v. Pierce

Intermediate Court of Appeals of Hawaii

August 30, 2013

GALE SCUDDER, Plaintiff/Counterclaim Defendant-Appellant,
v.
FRANK PIERCE, III; NANCY STEINECKE; and E KOMO MAI SPORT HORSES, LLC, Defendants/Counterclaimants-Appellees, and DAVID W. LACY; LACY and JACKSON, LLLC, et al., Defendants

NOT FOR PUBLICATION IN WEST'S HAWAI'I REPORTS AND PACIFIC REPORTER

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT (CIVIL NO. 06-1-0187)

Peter Van Name Esser and William J. Rodsil, for Plaintiff/Counterclaim Defendant-Appellant.

Robert D. S . Kim, for Defendants-Appellees.

Foley, Presiding Judge, Leonard and Reifurth, JJ.

MEMORANDUM OPINION

Plaintiff/Counterclaim Defendant-Appellant Gale Scudder ("Scudder") appeals from the September 5, 2 008 Findings of Fact, Conclusions of Law and Order Granting Defendants Frank Pierce, III, Nancy Steinecke and E Komo Mai Sport Horses Motion Regarding Equitable Claims ("Order re Equitable Claims"); the September 8, 2008 Final Judgment; the October 30, 2008 Order Granting in Part Plaintiff Gale Scudder's Rule 54(d), Hawaii Rules of Civil Procedure Motion for Attorney's Fees and Costs ("Order Granting in Part Fees and Costs"); and the October 30, 2 008 Order Denying Plaintiff Gale Scudder's Rule 59(e), Hawaii Rules of Civil Procedure Motion to Alter or Amend the Final Judgment Entered on September 8, 2008, entered in the Circuit Court of the Third Circuit ("Circuit Court").[1]

Based on the record and the arguments asserted by the parties, we vacate the Order re Equitable Claims, the Final Judgment, and the deemed denial of Scudder's motion for attorneys' fees and costs, and remand for further proceedings consistent with this opinion. I. Background

A. Complaint

On June 15, 2006, in the Circuit Court, Scudder filed the Complaint against Defendants/Counterclaimants-Appellees Frank Pierce, III ("Pierce") and Nancy Steinecke ("Steinecke") (collectively, "Lessees"), E Komo Mai Sport Horses, LLC ("E Komo Mai") (Lessees and E Komo Mai, collectively, "EKM Defendants"), and Defendants David W. Lacy ("Lacy") and Lacy and Jackson, LLLC (collectively, "Lacy Defendants") ("Complaint"). Scudder alleged as follows:

Prior to September 1, 1995, Lessees operated an equestrian-services business under the name E Komo Mai Sport Horses on property owned by Hawai'i Preparatory Academy ("HPA"), where they provided horse care and riding services to Scudder, among other clients. On or before September 1, 1995, Lessee's lease on the HPA property was terminated by HPA.

On or before September 1, 1995, Gromel Partners, L.P. ("Gromel"), controlled by Scudder and her family members, owned approximately thirty acres of real property in North Kohala, adjacent to Scudder's own ranch and residence ("Subject Property"). Lessees inspected the Subject Property and informed Scudder that they would like to reside and operate their business there: Scudder told Lessees she did not know what to include in a legal agreement, but Pierce, who claimed that he was experienced with leases, offered to and did draft the original lease agreement between Gromel and the Lessees for use of the Subject Property ("Lease").

According to Scudder, the Lease consisted of a few sentences and stated that Gromel leased the Subject Property to Lessees for a term of five years at $1, 000.00 per month and that Lessees had an option for one additional five-year term. Scudder lost her copy of the Lease, but did not remember signing the standard form agreement that Pierce and Steinecke later claimed that she signed.

From September 1, 1995 until January 10, 2005, Lessees cared for Scudder's horses, with Scudder paying only for feed and any medication. From time to time, Lessees, claiming insolvency, would request that Scudder voluntarily pay or loan money to Lessees for various reasons, including purchasing a horse from Lessees, purchasing a truck for them, helping defray costs for maintaining Scudder's horses, and enabling Lessees to pay their taxes.

In 1997, Steinecke, citing their financial condition, asked Scudder if Lessees might defer rental payments indefinitely. Scudder agreed.[2] Lessees did not resume paying monthly rent until February 2005. Furthermore, in 1999, Scudder paid $500, 000 to construct an arena and improvements on the Subject Property for the benefit of Lessees' business.

On March 15, 1998, Pierce presented Scudder with what purported to be a written addendum to the Lease between Gromel, Pierce, and Steinecke, ("First Lease Amendment") which Scudder signed. The First Lease Amendment provided that as of August 31, 2000, tenant had the option to renew the Lease for up to two additional five-year periods at a monthly rent of $1, 000. On May 9, 2005, Pierce presented Scudder with what purported to be two further written addenda to the Lease. The first was an addendum to the Lease between Gromel/Scudder, and Pierce and Steinecke, dba E Komo Mai Sports Horses ("Second Lease Amendment"), which Scudder signed. The second was an addendum to the Lease between Scudder, and Pierce and Steinecke, dba E. Komo Mai Sports Horses ("Third Lease Amendment"), which Scudder also signed. The Second and Third Lease Amendments differed only in the identity of the Lessor and provided that as of May 1, 2005, tenant had the option to renew the Lease for up to three five-year periods at a monthly rent of $1, 000.

In February 2005, Lessees began to bill Scudder for the boarding, care, and maintenance of her horses — in excess of $4, 000.00 per month.[3] Scudder objected, but paid the bills through July 2005, after which time she refused to pay. In response. Lessees refused to take care of Scudder's horses, showed Scudder alleged unsigned contracts for the care of her horses, and presented her with a bill for more than $150, 000.00 for caring for her horses for the previous ten years.

Scudder's Complaint asserted the following counts, [4]some of which would properly be characterized as defenses rather than causes of action: (1) no contract formation, (2) contract invalid as a result of mistake, (3) fraud in the inducement, (4) summary possession, (5) fraud, (6) breach of fiduciary duty or confidential relations, (7) undue influence, (8) breach of contract, (9) unjust enrichment, (10) unfair and deceptive trade practices, (11) legal malpractice, and (12) punitive damages.[5]

B. Counterclaim

On July 7, 2006, EKM Defendants filed a counterclaim against Scudder ("Counterclaim"), alleging as follows:

Between September 1995 and October 1998, Scudder boarded her horses with EKM Defendants, agreeing to pay related board and fees. During this time, Scudder received bills and paid for "all agreed upon additional charges" for her horses, including extra feed, treatment for injuries, handling for the veterinarian, supplies, medications, trailering, grooming, hoof trimming, and lessons. From 1998, Scudder also paid for blanketing and unblanketing. Scudder received bills and paid for' board and additional charges from October 1998 through December 1999.

From September 1995 to December 1999, EKM Defendants paid rent to Scudder. However, in January 2000, Scudder and EKM Defendants reached an oral agreement whereby EKM Defendants' rent would be offset against Scudder's obligations related to the boarding and care of her horses. As of the date of the Counterclaim, EKM Defendants claimed that Scudder owed them more than $160, 000.00.

EKM Defendants asserted claims against Scudder for: (1) breach of contract, (2) quantum meruit, (3) fraudulent inducement, (4) punitive damages, and (5) unfair and deceptive trade practices.

C. Motion in Limine

On March 10, 2008, EKM Defendants filed several motions in limine. The sixth motion ("Motion in Limine No. 6") included a request for a Hawaii Rules of Evidence Rule 104 hearing, and sought an order barring Scudder from presenting any evidence and/or the testimony of proposed expert witness, Stewart H. Hussey ("Hussey"), "regarding incomplete and deficient appraisals and valuations at the trial in this case." Scudder proposed to present Hussey to testify about the rental value of the Subject Property.

EKM Defendants argued that Motion in Limine No. 6 should be granted because Hussey's report stated that it was a "'preliminary report, '" that "'the results of this analysis are NOT considered a full, [Uniform Standards of Professional Appraisal Practice ("USPAP")] compliant appraisal, '" and that "'[t]his report is not suitable for lending or other purposes.'" In support, the EKM Defendants submitted a letter dated May 28, 2007, from Hussey to Scudder'.s counsel, which urged counsel to " [p]lease consider this report a preliminary, 'essential findings' report only. ... I STRONGLY recommend converting this basic market data into a full, USPAP-compliant rent survey report [.]" "Otherwise, " Hussey warned, "an opposing attorney could undermine the credibility of the data herein in a deposition and/or cross examination procedures by pointing out how the report fails to comply with USPAP requirements."

On April 2, 2008, the Circuit Court granted Motion in Limine No. 6 on the basis that the assignment that Hussey was given did not comply with USPAP and, although Hussey performed a follow-up investigation and inspection of the property, those results were not provided in any written supplemental report.

D. Judgment as Matter of Law as to Steinecke

A trial was held before a jury. While legal claims were presented for the jury's determination, equitable claims were "submitted to the jury as an advisory jury as the trial court reserved the equitable issues for its determination."

On April 9, 2008, Scudder rested her case. EKM Defendants moved for judgment as a matter of law ("JMOL"). The Circuit Court granted the motion as to counts asserted against Steinecke for fraudulent inducement, breach of fiduciary duty, and unfair and deceptive trade practices, - but, without giving any explanation for the different treatment, denied the motion as to Pierce and E Komo Mai.

E. Special Verdict Form

With the jury limited to addressing Scudder's claims against Pierce and E Komo Mai, it completed the Special Verdict Form ("Verdict") on April 15, 2008. The jury found that (1) there was no meeting of the minds between Scudder and the EKM Defendants on the essential terms of a lease effective September 1, 1995; (2) there was no meeting of the minds between the EKM Defendants and Scudder on the essential terms of oral agreements for horse-care services; (3) Pierce engaged in unfair or deceptive acts or practices in the conduct of his trade or commerce in connection with horse-care provided to Scudder; (4) Pierce breached his fiduciary or confidential relationship with Scudder and/or Grommel arising from the lease effective September 1, 1995, the First Lease Amendment, the Second Lease Amendment, and the Third Lease Amendment; (5) Pierce fraudulently-induced Scudder and/or Grommel to enter into the lease effective September 1, 1995, and three lease addenda; (6) EKM Defendants never repaid Scudder for a $15, 000.00 loan in 2004 or a $25, 000.00 loan in 2005; (7) EKM Defendants' horse-care-services agreement and written or oral lease agreements and addenda came within the Statute of Frauds; (8) Scudder waived rent; (9) Scudder ratified the Second Lease Amendment, but no other lease or addenda; and (10) the Third Lease Amendment was not a novation of the Lease.

F. Findings of Fact, Conclusions of Law, and Order on Equitable Claims

On May 5, 2008, EKM Defendants filed their motion regarding equitable claims after jury verdict ("Motion on Equitable Claims"). EKM Defendants argued that they were entitled to quantum meruit, seeking $161, 052.62 for horse-care services; to extend the lease to 2020 per the jury's finding that Scudder ratified the Second Lease Amendment; and a ruling that Scudder waived the collection of rent.

On September 5, 2008, the Circuit Court entered the Order re Equitable Claims. The Circuit Court ...


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