United States District Court, D. Hawaii
THORIN JOHN LINDSTROM and KRISTIN KATHLEEN LINDSTROM, Plaintiffs,
MOFFETT PROPERTIES; WILLIAM B. MOFFETT; and MICHAEL REID, Defendants.
ORDER DENYING (1) DEFENDANT MICHAEL REID'S MOTION
FOR SUMMARY JUDGMENT; AND (2) DEFENDANTS MOFFETT PROPERTIES
AND WILLIAM B. MOFFETT'S MOTION FOR SUMMARY
Derrick K. Watson, United States District Judge.
Lindstroms allege that they were unable to build a home at
their desired site on a parcel of land purchased from seller
Michael Reid because a large amount of “fill” on
the property was not adequately disclosed prior to closing.
Although it is undisputed that Reid generally disclosed the
presence of fill prior to the sale, the Lindstroms allege
that he and realtor William Moffett of Moffett Properties
knew much more. The Lindstroms assert that they would not
have purchased the vacant parcel had Defendants disclosed the
magnitude of the fill, based on the information available to
them at the time.
seek summary judgment on the Lindstroms' claims for
breach of contract and misrepresentation. Defendants contend
that they satisfied their obligations to the Lindstroms
principally because they had no information to provide beyond
disclosing the presence of fill-which was, in any event,
obvious to a reasonable observer upon visual inspection. Upon
careful consideration of the entirety of the record, however,
genuine issues of material fact remain with respect to
several matters-notably, what information concerning the fill
was available to Defendants prior to the sale and what a
reasonable observer would have seen upon viewing the parcel.
The Court therefore DENIES both Motions for Summary Judgment,
as detailed below.
Lindstroms purchased Lot 35A, a 1.95-acre parcel of vacant
land, from Reid in early 2014. Lot 35A is located at 108A Pua
Niu Way, Lahaina, Maui, Hawaii 96791 (the
“Property”). Reid acquired the parcel, together
with an adjoining one (Units A and B), in April 2013. George
Van Fischer, a licensed real estate salesperson and employee
of Moffett Properties, represented Reid in the 2013 sale.
Decl. of George Van Fischer ¶ 2, Dkt. No. 79-1.
January 2014, Reid sold the smaller of the two lots, Unit B,
with an existing cottage. Id. On February 18, 2014,
Reid entered an Exclusive Right-To-Sell Listing Agreement
with Moffett Properties to list the larger vacant parcel,
Unit A, for $1, 350, 000. Fischer Decl., Ex. A (Listing
Agreement), Dkt. No. 79-2.
Lindstroms, who already owned another home in the same
Launiupoko subdivision, contacted Defendant William B.
(“Buz”) Moffett, after seeing a “For
Sale” sign on the lot, and Moffett showed them the
Property in February 2014. Decl. of William B. Moffett
¶¶ 2-3, Dkt. No. 79-4. While viewing the Property,
Moffett claims that Thorin Lindstrom told him that he wanted
to build a home “alongside the ravine on the
westernmost end of Property.” Moffett Decl. ¶ 5.
When Moffett “pointed out to him the obvious presence
of uncompacted, loose fill in that area of the lot which
would not allow him to build in that area . . .
[Lindstrom's] response to [Moffett's] warning was,
‘you'd be surprised what I can do.'”
Moffett Decl. ¶ 5. Lindstrom acknowledges seeing
“loose rocks and boulders on the property” but
otherwise denies having the conversation described by
Moffett. 7/20/17 T. Lindstrom Dep. Tr. at 54, Dkt. No. 75-3;
Decl. of Thorin Lindstrom ¶ 11, Dkt. No. 86-1.
prepared a Purchase Contract, with a counter-offer for the
Property of $1, 000, 000, and a Dual Agency Consent Addendum,
which were signed by Thorin Lindstrom on February 25, 2014.
Moffett Decl. ¶ 4, Ex. B (Purchase Contract; Dual Agency
Agreement). On February 28, 2014, Reid countered at $1, 224,
000, and the Lindstroms accepted on the same date. Reid's
counter included an “As Is” Condition Addendum.
Moffett Decl. ¶ 4, Ex. C (Counteroffer; “As
March 7, 2014, Reid provided a Seller's Real Property
Disclosure Statement, which required him to disclose all
“material facts” concerning the Property. Fischer
Decl., Ex. G. (Seller's Disclosure), Dkt. No. 79-3.
Fischer assisted Reid in the preparation of the Seller's
Disclosure. To do so, the two met at Reid's home and
drafted responses to questions on the standard form, based
upon information contained in a Preliminary Title Report from
Reid's 2013 purchase. Fischer Decl. ¶ 9. According
to Reid, when Fischer knew something about the Property that
he did not, Reid included that information as well. Decl. of
Michael Reid ¶ 9, Dkt. No. 75-2. When Reid and Fischer
finished going over all of the questions on the form, Fischer
offered to type the answers, physically complete the form,
and send it to Reid for his electronic signature via
DocuSign, in order to promptly transmit it to the Lindstroms.
Reid Decl. ¶ 10.
questions on the Seller's Disclosure form asked whether
certain conditions were present on the Property and
corresponding response boxes were provided to check either
“YES, ” “NO, ” “NTMK, ”
or “NA.” If the response to a question was
“YES, ” Reid was directed to “explain all
material facts known to you in Section H.” Of
importance here, Reid checked “YES” in response
to Question 41, which asked: “Is there filled land on
the Property?” He did not include any further
explanation in Section H, as directed on the form, or in the
attached, typed addendum that included his explanations to
the other questions with affirmative responses. See
Seller's Disclosure at 2, 5. According to Reid, although
it was obvious that there was fill present on the lot due to
the loose, large rocks on the perimeter of the northwestern
edge of the Property, he did not know “how much fill
was on the property nor the nature of the fill beyond the
large rocks that were visible. The totality of [Reid's]
knowledge was the belief that there was fill present on the
property.” Reid Decl. ¶ 11.
acknowledges that “the addendum to the disclosure does
not contain a narrative to accompany [his] ‘yes'
answer with respect to fill.” Reid Decl. ¶ 12. He
explains the omission as follows:
That was an oversight due exclusively to the fact that there
was no additional information to provide beyond identifying
that fill was present. Had a narrative been included, it
would have simply been that fill is present and I had no
additional information to provide as to either the nature of
the fill or the extent of the fill. In other words, the
“yes” answer to the fill question was all of the
information that I had to provide to a prospective buyer.
Decl. ¶ 12.
however, had additional knowledge regarding the fill. He
observed a “substantial amount of fill in the ravine at
the western or Makai end of the Property.” Suppl.
Fischer Decl. ¶ 5, Dkt. No. 90-8. At his deposition,
Fischer estimated that “hundreds if not thousands of
yards of fill” were present in that area. 1/17/18
Fischer Dep. Tr. at 82-83, Dkt. No. 86-12. Fischer explained
his understanding of the disclosures in the following manner:
If I had observed fill in other areas of the Property, I
would have disclosed that condition to Buz Moffett for
disclosure to the Plaintiffs. Since I did not observe fill in
other areas, I did not discuss with Buz my estimate of the
amount of fill that was in the ravine in terms of yards of
material as it would have been speculation on my part as no
soils studies had been done. Buz and I met on this parcel
several times and did discuss at length that there was
unstable fill in the western ravine. In these conversations I
also shared that the rest of the lot appeared to be solid
with many area[s] of solid undisturbed rock exposed.
Fischer Decl. ¶ 5. Fischer also explained that he shared
with Moffett that there was fill on the Property and that he
understood that Moffett “shared with the Lindstroms
that there was fill on the property.” 1/17/18 Fischer
Dep. Tr. at 87.
forwarded the Seller's Disclosure to Kristin Lindstrom on
March 7, 2014. He also discussed the disclosures with the
Lindstroms, who did not have any questions “regarding
the disclosure of the presence of fill on the
Property.” Moffett Decl. ¶ 15. Moffett
“assumed that they knew it referred to the loose fill
in and near the ravine that we all saw at the early
inspections of the Property and that they would consult with
[their architect Marty] Cooper regarding fill condition at
the Property.” Moffett Decl. ¶ 15. According to
Moffett, he asked the Lindstroms “if they planned on
having soils studies done, because of the fill on the
Property, but they said their contractor said one was not
necessary.” Moffett Decl. ¶ 6. When Moffett
offered his assistance in providing referrals to geotechnical
professionals “to evaluate the soils conditions,
” he claims that the Lindstroms declined,
“stating they had their own contacts [to] do such
work.” Moffett Decl. ¶ 6. Based upon their
responses, Moffett assumed that the Lindstroms
“understood that they could not build alongside the
western end of the Property because of the loose, uncompacted
fill, but that they would perform their due diligence by
having the condition inspected.” Moffett Decl. ¶
Lindstroms dispute this version of events. According to
Thorin Lindstrom, “Moffett did not warn us to have the
fill condition investigated by professionals.” T.
Lindstrom Decl. ¶ 11. “Moffett never inquired if
we wanted to order a soils study or if we had asked our
contractor about one.” T. Lindstrom Decl. ¶ 14.
“If Moffett mentioned for us to get a soils study
because he was concerned about the fill, Kris and I would not
have purchased the lot knowing it would potentially need a
large amount of work.” T. Lindstrom Decl. ¶ 11.
Kristin Lindstrom likewise denies that Moffett
“mentioned the uncompacted loose fill which would not
allow building in any areas on the Property.” K.
Lindstrom Decl. ¶ 9. She claims that “the only
mention of the fill was from Moffett, telling us the property
was graded flat and ready to build.” K. Lindstrom Decl.
the inspection period in late February and early March 2014,
Moffett assisted the Lindstroms by providing to them and
their architect copies of the Farm Site Plan, Farm Plan
Unilateral Agreement, CPR documents and condominium map.
Moffett. Decl. ¶¶ 9-10. Moffett also helped Marty
Cooper, the Lindstroms' architect, by contacting Atom
Kasprzycki, the architect of the cottage on Unit B, who
previously created CAD files of the farm plans and a
topographic map. Moffett. Decl. ¶¶ 11-12. On March
4, 2014, Kasprzycki emailed to Cooper, Moffett, and Kristin
Lindstrom, a topographic file and CPR plans in DWG format,
the Farm Plan and Approval Letter, and a document described
by Kasprzycki as a “Site Study related to developers
fill on lot during subdivision development.” Moffett.
Decl. ¶ 13, Ex. F (3/4/14 Email). Because neither
Moffett nor the Lindstroms possessed the necessary software,
they were unable to open or view the attached files. Moffett.
Decl. ¶ 13; K. Lindstrom Decl. ¶ 16. Cooper did not
review portions of the attached documents, in particular
those relating to fill, see 7/27/17 Cooper Dep. Tr.
at 36-39, 70-81, Dkt. No 75-5, and in any event, the
Lindstroms maintain that he was not retained to perform an
investigation of the fill or soil conditions. K. Lindstrom
Decl. ¶ 15. Moffett believed that Cooper, “having
received the topographic map and site studies on March 4,
2014, would be advising the Lindstroms if further
investigations of the fill condition were recommended.”
Moffett. Decl. ¶ 13. Cooper, however, did not.
to closing, the Lindstroms did not inspect the Property.
7/20/17 T. Lindstrom Dep. Tr. at 53-54, Dkt. No. 75-3; T.
Lindstrom Decl. ¶ 7 (“We didn't think
[inspection] was necessary since we were purchasing an empty
lot that was represented as being ready for a house to be
built.”). After closing, the Lindstroms were not able
to obtain the necessary permits from the County of Maui to
build a residence on their desired location on the Property.
In November 2014, the Lindstroms “first learned from
Rulan Waikiki from the Maui County Planning Department that
the Property . . . purchased from Reid had massive amounts of
fill up to 35 feet above original grade.” T. Lindstrom
Decl. ¶ 16; see also 1/17/18 Rulan Waikiki Dep.
Tr. at 19 (explaining that Maui County “rules and
regulations specify a maximum building height of 30 feet from
natural or finished grade, whichever is lower, ” but
that if a planned structure is in excess of 30 feet, the
County “cannot approve the building permit
application”), Dkt. No. 86-11.
to the Lindstroms, they learned that the “massive
amount of fill contained uncompacted material, some of which
was trash, from Kenneth Stewart, the soils engineer hired by
[their] attorney.” However, prior to November 2014,
they “were unaware of the massive amounts of fill on
the Property . . . and would not have bought the property
knowing the land work would have put this house out of
budget.” K. Lindstrom Decl. ¶¶ 4-5; see
also T. Lindstrom Decl. ¶¶ 4-5, 12 (“The
costs of the lot with grading/site work would have been cost
prohibitive.”). The Lindstroms sold the Property during
the pendency of this litigation. 7/20/17 T. Lindstrom Dep.
Tr. at 99.
Lindstroms allege that the Property is unsuitable for their
intended purposes, because they could not build a home in
their planned location, and that its resulting value is
substantially less than what they paid for it. Compl. ¶
11. Plaintiffs filed their Complaint on February 23, 2016,
asserting the following causes of action: (1) breach of
contract against Reid (Count I); (2) breach of contract and
fiduciary duty against Moffett Properties (Count II); (3)
breach of express and implied warranties against Reid (Count
III); (4) rescission (Count IV); (5) tortious breach of
contract against Reid (Count V); (6) intentional and
negligent misrepresentation against all Defendants (Count
VI); (7) fraud against all Defendants (Count VII); and (8)
unfair and deceptive trade practices (“UDAP”)
against Moffett Properties (Count VIII). Only the claims for
breach of contract and negligent misrepresentation remain
against Reid following the Court's partial grant of his
motion to dismiss.
and the Moffett Defendants seek summary judgment on all
remaining claims. Although the Complaint alleged several
bases for the breach of the parties' Purchase Agreement
for the sale of the Property and other obligations, the
primary focus at the summary judgment stage has been narrowed
to Defendants' failure to fully disclose the nature and
the extent of the fill on the Property, and whether this
amounts to an actionable misrepresentation, a common element
essential to the remaining claims.
to Federal Rule of Civil Procedure 56(a), a party is entitled
to summary judgment “if the movant shows that there is
no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” The moving
party is entitled to judgment as a matter of law when the
nonmoving party fails to make a sufficient showing on an
essential element of a claim on which the nonmoving party has
the burden of proof. Celotex Corp. v. Catrett, 477
U.S. 317, 323 (1986).
checking “YES” in response to Question 41 on the
Seller's Disclosure, Reid acknowledged that there was
fill on the Property. However, he failed to offer any further
explanation or detail, as required by the form. Whether Reid
(1) “believed no explanation was necessary because [he]
did not know anything [more] about the fill, ” or,
alternatively (2) believed that “the document required
something by way of explanation and so his not explaining
that he had no further relevant facts about the fill was an
oversight by him, ” Reid Reply at 6, Dkt. No. 89, his
failure to include any further explanation presents
an issue of fact as to whether the Seller's Disclosure
was complete, “prepared in good faith and with due
care.” That is particularly the case because, on the
disputed record before the Court, there are material facts
“within the knowledge or control of Seller”
regarding the fill that were not made known to the Lindstroms
prior to the sale. Accordingly, summary judgment with respect
to the remaining claims cannot be entered.
Whether the Seller's Disclosure Statement Was Prepared in
Good Faith and With Due Care Remains an Issue of Fact
Precluding Summary Judgment in Favor of
collectively argue that no cause of action may lie against
them for breach of contract or fiduciary duty, intentional or
negligent misrepresentation, or for violation of Hawaii
Revised Statutes (“HRS”) Chapter 480 because the
Seller's Disclosure was prepared in good faith and with
due care. See HRS § 508D-9 (“A buyer
shall have no cause of action against a seller or
seller's agent for, arising out of, or relating to the
providing of a disclosure statement when the disclosure
statement is prepared in good faith and with due care. For
purposes of this section, ‘in good faith and with due
care' includes honesty in fact in the investigation,
research, and preparation of the disclosure
statement[.]”). As detailed below, whether the lack of
narrative explanation for the fill disclosure was
inadvertent, or because Reid had no further information to
provide, or because Defendants assumed that full disclosure
had otherwise been made to the Lindstroms, Defendants fail to
establish that they are entitled to judgment as a matter of
law with respect to the Lindstroms' claims sounding in
contract or tort arising from the omission in the
The Purchase Agreement and ...