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Peck v. Nakkim

Intermediate Court of Appeals of Hawaii

December 20, 2013

LAWRENCE P. PECK, ROBBYN L. PECK and PECK, INC., a Hawai'i Corporation, Plaintiffs-Appellees,
v.
LYNN LINDER NAKKIM, CONTINENTAL PACIFIC, LLC, a Delaware Limited Liability Company, Defendants-Appellants

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS AND PACIFIC REPORTER

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT (CIVIL NO. 04-1-374)

Paul J. Sulla, Jr. for Defendant-Appellant LYNN LINDER NAKKIM

Douglas L. Halsted for Plaintiffs-Appellees

Foley, Presiding Judge, Leonard and Ginoza, JJ.

MEMORANDUM OPINION

Defendant-Appellant Lynn Linder Nakkim (Nakkim) appeals from the Judgment and Decree of Specific Performance (Judgment) filed on October 2, 2008, in the Circuit Court of the Third Circuit (Circuit Court).[1] After a jury-waived trial, judgment was entered against Nakkim and in favor of Plaintiff-Appellees Lawrence P. Peck (Peck), Robbyn Peck (Mrs. Peck; together, the Pecks), and Peck, Inc. (collectively, the Plaintiffs), on Plaintiffs' Complaint for Specific Performance, Injunctive Relief And Damages (Complaint).

I. BACKGROUND

The parties in this case executed two documents: (1) an Agreement of Sale for a 50-acre parcel of land (Property) between Nakkim and the Pecks; and (2) a Construction Contract between Nakkim and Peck, Inc., whereby Peck, Inc. would build a single story home (Home) for Nakkim on one of Nakkim's other properties. The Agreement of Sale, dated November 29, 2003, provided that the Pecks would pay a purchase price of $180, 000 for the Property by:

1) Assuming the NOTE on the Property. The balance of $87, 412.42 shall be assumed by [the Pecks] and [the Pecks] accept[] the terms and conditions of the NOTE [in favor of Continental Pacific, LLC (Continental Pacific)] . . . .
2) It is agreed that [the Pecks] shall build on [Nakkim's] property a HOME as defined in CONSTRUCTION CONTRACT documents.

The Agreement of Sale also provided that the Pecks would lease 40 acres of the Property to Nakkim for the purpose of grazing horses for five years at $1, 000 per year. Under the Agreement of Sale, the Pecks were responsible for taxes and other charges. Finally, in the event of default, Nakkim was required to provide notice in writing, by registered or certified mail, after which the Pecks would have ten days to correct the default.

Peck testified that he made timely monthly payments beginning on or about December 1, 2003, with the exception of the March 2004 payment. Nakkim notified Peck of the arrearage on August 12, 2004 via letter. There is no evidence that the letter was sent through registered or certified mail, as required under the Agreement of Sale. Nakkim's records indicate that the Pecks sent Nakkim a check for the March 2004 payment, which was dated August 13, 2004.

The Construction Contract, also dated November 29, 2003, was an agreement between Nakkim and Peck, Inc., whereby Peck, Inc. would build a single-story home on Nakkim's property in the Waiki'i Ranch area for the sum of $223, 396 (Construction Sum), to be applied to the Pecks' purchase of the Property. The Construction Contract included a clause (Additional Cost Clause) providing for an increase in cost:

15 ADDITIONAL COST: If [Peck, Inc.] wishes to make a Claim[2] for an increase in the Contract Sum, written notice as provided herein shall be given before proceeding to execute the Work. Prior notice is not required for Claims relating to an emergency endangering life or property. If the Contractor believes additional cost is involved for reasons including but not limited to (1) a written interpretation from the Architect, (2) an order by [Nakkim] to stop the Work where [Peck, Inc.] was not at fault, (3) a written order for a minor change in the Work issued by [Nakkim] or agent thereof, (4) failure, by [Nakkim], to make payment due, (5) termination of the [Construction Contract] by [Nakkim], or (6) other reasonable grounds, Claims shall be filed in accordance with the procedure established therein.

Under section 4.1 of the Construction Contract, "[Nakkim] shall secure [for] and pay for necessary approvals, easements, assessments and charges required for the construction, use or occupancy of structures."

The Circuit Court found, and Nakkim does not dispute, that, although they were set forth in two documents, the Agreement of Sale and the Construction Contract were intended by the parties to be an expression of a single agreement between Plaintiffs and Nakkim (the Contract).

Pursuant to the requirements of the Waiki'i Ranch Homeowners' Association, the owner of a lot in Waiki'i Ranch development must obtain approval from the Waiki'i Design Committee (Design Committee) before constructing on their lot. Nakkim encountered a number of setbacks in seeking the Design Committee's approval of the construction of the Home due to deficiencies including the inability to produce an adequate topological map, the original design of the House being too small, and failure to submit a color board.[3]

On July 14, 2004, Peck, Inc. sent a letter to "Perspective" clients notifying them that construction costs in Hawai'i had increased dramatically, and that Contract Sums for certain contracts would be increased accordingly. The letter noted that Peck, Inc. was entitled to increase the cost of construction through the Additional Cost Clause of the Construction Contract. The letter was not specifically directed to Nakkim, nor did it include a specific figure by which construction costs would rise. The letter stated, however, that "notice is hereby given that the Contract Sum will be increased accordingly prior [to] the breaking ground and beginning construction on your project." Peck testified that the purpose of the letter was merely to keep clients abreast of recent cost increases in the construction industry.

In response, Nakkim sent Peck a letter on July 21, 2004, in which she stated that "a deal was a deal, " and began to take over payments on the Continental Pacific Mortgage "in anticipation of [Peck's] defection[.]" Additionally, Nakkim wrote that she would increase the sale price of the Property if he wanted to renegotiate the price of the Home.

As early as October 7, 2004, Nakkim began listing the Property for sale. Then, through a November 4, 2004 letter, Nakkim gave Peck, Inc. seven days to complete the Home. Citing the "Termination of Contract by Owner" clause of the Construction Contract, Nakkim alleged that Peck had "persistently and repeatedly failed to perform the work according to the contract and its specifications, " and that such delays entitled her to "finish the work by whatever reasonable method [she] the owner may find expedient." This ultimatum was reiterated in a November 5, 2004 letter, which also informed Peck that the "entire matter" was cancelled. However, it appears that, as of November 5, 2004, Nakkim had not obtained final approval to begin construction of the Home.

On November 12, 2004, Plaintiffs filed their Complaint seeking, inter alia, injunctive relief to prevent Nakkim from selling the Property and specific performance of the Agreement of Sale. Nakkim answered and filed a counterclaim seeking, inter alia, cancellation and rescission of the parties' agreements. Following a jury-waived trial in March and April of 2008, the Circuit Court issued its Findings of Fact (FOFs), Conclusions of Law (COLs), and Order on July 23, 2008. The court's FOFs included, inter alia:

4. On November 29, 2003, the Plaintiffs and [Nakkim] signed two documents: An Agreement of Sale and a Construction Contract. These two documents were intended by the parties to be an expression of a single agreement between Plaintiffs and [Nakkim].
5. Under the terms of the Agreement of Sale, Plaintiffs Lawrence L. Peck and Robbyn L. Peck agreed to purchase and Defendant Lynn Linder Nakkim agreed to sell the [Property] for the sales price of One Hundred Eighty Thousand Dollars ($180, 000.00).
6. The payment by Plaintiffs for the [Property] under the Agreement of Sale was to be made as follows: Payment of $87, 412.42 representing the balance on [Nakkim's] mortgage due and owing to [Continental Pacific]; the balance of $92, 587.58 to be paid by providing Defendant credit for payments due from [Nakkim] under the Construction Contract to Plaintiff Peck Inc.[]
7. The Agreement of Sale makes specific reference to the Construction Contract. In particular, the Agreement of Sale states under the heading of "PAYMENT OF THE PURCHASE PRICE" that:
It is agreed that BUYER [Plaintiffs Lawrence and Robbyn Peck] shall build on SELLER'S [Nakkim] property a HOME as defined in CONSTRUCTION CONTRACT documents. The balance of this AGREEMENT OF SALE shall be paid by SELLER first benefits [sic] due on the CONSTRUCTION CONTRACT and shall continue until the balance due on this AGREEMENT OF SALE is paid in full with the exception of the NOTE amount.
9. The "Construction Sum" under the Construction Contract was set at $223, 396.00 but was subject to adjustment. The Construction Sum was "subject to additions and deductions as provided in the Contract documents." Paragraph 15 of the General Conditions of the Construction Contract permitted [Peck, Inc.] to make a claim for an increase in the Contract Sum because of additional ...

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