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Furuya v. Association of Apartment Owners of Pacific Monarch, Inc.

Supreme Court of Hawaii

May 2, 2016

CLARENCE O. FURUYA AND LONA LUM FURUYA, Petitioners-Respondents/Plaintiffs-Appellees/Cross-Appellants,
v.
ASSOCIATION OF APARTMENT OWNERS OF PACIFIC MONARCH, INC.; JAMES DOZIER; GRETA WITHERS; ELWIN STEMIG; FOIL CRAVER; KAZUO SAWADA, Respondents-Petitioners/Defendants-Appellants/Cross-Appellees.

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (NO. 30485; CIV. NO. 06-1-1057)

George W.Van Buren, and John B. Shimizu for petitioners-respondents.

Matt A. Tsukazaki for respondent-petitioner.

RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

OPINION

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, 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]

I. Facts

A. Background

The Pacific Monarch is a condominium project located in Honolulu, Hawai'i. 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 the leased fee interest[2] 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 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 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 Hawai'i (Title Guaranty) for the unit, the sale of the leased fee interest in 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, 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.

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 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, 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.

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 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 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 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 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 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 filed an answer to the Furuyas' Complaint. In relevant part, AOAO averred that the Furuyas and AOAO entered into negotiations for the ...


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