Title: TMJ Hawaii, Inc. v. Nippon Trust Bank.

State: hawaii

Issuer: Hawaii Supreme Court

Document:

LAW LIBRARY

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IN THE SUPREME COURT OF THE STATE OF HAWAI'I

---000~

 

‘TMJ HAWAII, INC., a Hawai'i corporation, Plaintiff-Appellant,

vs.

NIPEON TRUST BANK, aka Nihon Shintaku Bank, a Japanese
corporation, and KELLEY DRYE & WARREN, a New York general
partnership, and KELLEY DRYE § WARREN LLP, a New York limited
Liability partnership, Defendants-Appellees.

OO TTT 2

No. 25588 ofl

 

CERTIFIED QUESTION FROM THE UNITED STATES
DISTRICT COURT OF THE DISTRICT OF HAWAI'I
(CIV. NO. 97-01518 #6)

aad

 

JANUARY 31, 2007

MOON, C.J., LEVINSON, NAKAYAMA, ACOBA, AND DUFFY, JJ.

 

OPINION OF THE COURT BY NAKAYAMA, J.

The corpus of the question presently before this court
concerns the validity of a written instrument, executed on
Septenber 15, 1994, by which Ishimura Building Co., Ltd.
(“Ishisura Building”) purported to assign its claims against
Wippon Trust Bank (*NTB“) and Kelley Drye & Warren ("KDW") to THI
Hawaii, Inc. ("TMI").

According to the Septenber 15, 1994 assignment, TW
filed a complaint in the first circuit court on August 20, 1997.
on October 31, 1997, KDW removed the action to the United states
District Court for the District of Hawai'i (“district court”).
Based upon the following recitation of facts, TMJ claimed that

(1) NTB breached its contractual, professional, and fiduciary
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duties to Ishimura Building, and (2) KDW actively participated in
perpetrating a fraud against Ishimira Building, in connection
with the sale of two commercial real estate properties previously
owned by Ishimura Building.

The district court, concerned about the validity of the
Septenber 15, 1994 assignment, certified to this court the
question whether Hawai'i law recognizes the assignability of the
tort claims of professional malpractice, breach of fiduciary
duty, and fraud claims. For the following reasons, we now answer
the certified question in the affirmative.

‘BACKGROUND

 

Trial has not yet commenced, and no evidence has been
received. Accordingly, the following factual background relies
primarily upon the information certified to this court by the
district court, as well as the allegations contained within TMJ’ a
amended complaint.

Ishimura Building was the owner of the Coconut Plaza
Hotel in Honolulu, Hawai'i and the Kailua Professional Center in
Kailua, Hawai'i. In May 1991, Ishimura Building retained NIB as
its agent and advisor to aid in the sale of the two conmercial
properties. The agreement between Ishimura Building and NTB
required NTS to sell the properties at the highest price and
under the best terns possible. NTB subsequently retained the
services of KDW to advise NTB with respect to the sale of
Ishimura Building’ s properties.

A. The Coconut Plaza Hotel
KOW selected Windward Professional Realty (“WER”) to

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broker the sale of the Coconut Plaza Hotel. The record indicates
that Ishimura Building authorized the execution of an agreenent
by which WER would serve as Ishimura Building's exclusive
representative and would receive $400,000 in compensation.
However, TMJ alleges that NIB falsely represented to Ishimura
Building that it was necessary to retain WR as its exclusive
sales representative because WPR had located a buyer for the
Coconut Plaza Hotel. TMJ further alleges that NTB and KDW failed
to disclose to Ishimura Building that the purpose for inducing
Ishimura Building to authorize the exclusive representation
agreement was that NTB and KDW were to receive $350,000 of the
$400,000 conmission from WPR. On August 1, 1991, the sale of the
Coconut Plaza Hotel closed, and WPR was paid the $400,000
conmission.
B. The Kailua Prof
With respect to the sale of the Kailua Professional

ional Center

 

Center, NTB and KOW negotiated with JVIH, Inc. (*JVIH") to
purchase the property for $9,350,000, TMJ alleges that,
following agreement of the aforesaid purchase price, NTB and KOW
restructured the deal such that JVIH would pay $8,500,000 to
Ishimura Building, and the remaining $850,000 would be dispersed
as follows: (1) $200,000 to NTB; (2) $150,000 to KDW; and (3)
$500,000 to Wise Board, Ltd., a Hong Kong corporation controlled
by NTB and/or KOM, TMJ claims that NTB falsely represented to
Ishimura Building that $8,500,000 was the highest price that
could be obtained for the Kailua Professional Center. TMJ also

claims that, had it not sold the Kailua Professional Center to

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IVIH for $8,500,000, it could have sold the property for its
actual fair market value, or $10,500,000.
II. DIscussroN

A. The Parties’ Arguments

As previously mentioned, the question certified to this
court is whether Hawai'i law recognizes the assignability of the
tort claims for professional malpractice, breach of fiduciary
duty, and fraud.

1, TM's opening brief

TMJ first argues that Havai'i Revised Statutes (“HRS”)
§ 634-1 supports the assignability of claims, generally. HRS §
634-1 (1993) provides, in relevant part, that “(t]he assignee of
any non-negotiable chose in action, assigned in writing, may
maintain thereon in the assignee’s own name any action which, but
for the assignment, might be maintained by the assignor{.]" T™J
contends that HRS § 634-1 is an enabling statute, the intent of
which is to enable an assignee to pursue an asaignor’s claim,
For support, TMJ refers us to Hany v, Yamaguchi, 30 Haw. 959
(1929), which commented on HRS § 634-1 (then codified as Revis:

 

Laws of Hawai'i ("RLH”) § 2361 (1925)).
Ty also argues that the general rule is that claims
are assignable, and that a claim's ability to survive the death
of the claimant is the test for determining assignability. To
that end, TMJ refers us to Alameda v, Spenser, 34 Haw. 667
(1938), which states, in relevant part, the following:
YALL things in action which survive and pass to the personal

representatives of s decedent creditor as assets, or continue as
Lisbilities against the representatives of a deceased debtor, are,

 

 

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in general, thus assignable; all of which do not thus survive, but
whulh'die with the person of the creditor or of the debtor, are
hot assignable. he first of these classes, according to the
Goctrine prevailing throughout the United States, includes all
Gleins arising from contract express or implied, with certain
Well-defined exceptions; and those arising from torts to real or
personal property, and from frauds, deceits, and other wrongs,
Ghereby an estate, eal or personal, is injured, diminished, or

   

‘Samages Snbraces ali tores to the person or
cheracter, yand damage are confined to the body
Gna the feelings; end also those contracts, often implied, the

   

Breach of wnich produces only gixect injury and
ental, to the person, such as promises to marry, injuries done by
Che went ef skill of  sedical practitioner, contrary to his
[npiied undertaking, and the Likes and ali

cha as they axe exgcutary, which stipulate solely for the special
Bersonal services, skill, cr knowledge of = contracting party.”

 

 

  

 

Id at 674 (emphases in original) (citation omitted). Applying
the survival test, TMJ avers that “if Ishimura Building was an
individual and died, Ishimura Building's fraud claims would
survive.”

‘qNJ farther pointe out that although the certified
question incorporates professional malpractice claims, the “First
Amended Complaint” did not “specifically use the words
professional malpractice” and it did not allege an attorney-
client relationship existed between Ishimura Building and KDW.
Nevertheless, TMJ argues that it could have pursued 2 legal
malpractice claim, had one been assigned. TMJ acknowledges that
sone jurisdictions do not permit the assignment of legal
malpractice claims where a highly personal and confidential
relationship existed between the attorney and the assigning
client. However, TMJ distinguishes those cases by asserting that
“there was no highly personal or confidential attorney-client

relationship between Ishimura Building and Defendants Kelley
 

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prye.*

Based upon the foregoing arguments, TNS requests that

this court answer the certified question in the affirmative.
2. gq Y ref

NTB and KDW counter that the doctrines of chanperty and
maintenance mitigate against concluding that Tehimura Building’ s
clains were assignable. They cite several cases stating that
chanpertous agreements are contrary to public policy. NTB and
KDW thus appear to assert that permitting TMJ, “an assetless,
dissolved corporation which clains to be an assignee of Ishimura
Building,” to pursue Ishimura Building's clains is contrary to
public policy.

Addressing TMJ's assertion that the assignability issue
is resolved by HRS § 634-1, NTB and KDW argue that the statute's
effect is merely procedural. They contend that the purpose of
HRS § 634-1 was to supersede the common law rule requiring an
assignee to pursue an assigned cause of action in the name of the
assignor. NTB and KDW point out that Hany interprets HRS § 634-1
as merely amending @ common law procedural rule restricting the

name under which an assignable claim could be pursued, as opposed

 

£ muy mistakenly presunes thet the district court's reference to =
professional malpractice claim stens from a perceived sttorney/elient
Felationship between ishinura Building and KDW. TM fails to realize that the
professional malpractice portion of the certified question originates from
Yshimure Building's relationship with HTB. Indeed, when summarizing the
clains stated in Tuy" complaint, the district court expressly stated that
“Plaintiff alleges thet Defendant Nippon breached its contractual,
professional, and fiduciary duties to Tshinure Building and perpetrated a
fraud against it,” (Esphases added.) Thus, the question whether Legal
nalpractice claims are assignable has not been certified to this court, and we
heed not address it here.

 

 

 
 

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to substantively altering the law to permit the assignment of an
othervise unassignable claim.

NTB and KOW next contend that Hawai'i law contemplates
Limits on the assignability of claims. On that score, they cite
Austin v. Michiels, 6 Haw. 595 (1885), in which this court held
that a tort action for damages caused to commercial credit and
business reputation was not “of an assignable nature.” Id, at
595-96, NTB and KoW also cite Cuson v, Maryland Cas. Co, 735 F.
Supp. 966 (D. Haw. 1990), which held that a claim for punitive
damages based upon an alleged breach of contract was assignable
insofar as “a punitive danages claim arising from a breach of
contract action sounds in both contract and tort and is not
purely personal in nature.” Id, at 970-71. In addition, NTB and
KDW refute TMJ’s reference to Alameda, asserting that (1) the
Alameda court was not faced with the question whether the claim
was assignable, and (2) although the Alameda court alluded to the
survival test, it did not purport to adopt that rule as this
jurisdiction's test for determining assignability.

Finally, NTB and KOW present this court with the
following three approaches utilized by other jurisdictions when
analyzing the assignability of claims: (1) the survival testy
(2) the characterization test; and (3) the facts and
circumstances test. They request that this court adopt the facts
and circumstances test insofar as it would place this court “in
the company of other courts which have held that valuable court
time and resources . . . should not be accorded to traffickers in

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B. BRS § 634-1
Our initial task is to determine whether HRS § 634-1
disposes of the present matter. HRS § 634-1 provides, in its

entirety, as follows:

[8634-1] Assignee; nonnegotiable chose. The assignee of
any non-negotiable chose in action, assigned in writing, ‘my
hRaintain thereon in the assignes's own nane any action which, but
for the assiganent, maght be maintained by the assignex) subject,
however, to ail equities and setoffs existing in favor of the
party liable against the assignor and unich existed at the tine of
the assignnent or at any time thereafter until notice thereof mas
given to the party liable, except 2a ctherwise provides

 

 

Reviewing the plain language of the statute, see In re
WaLtola 0 Moloka‘i, 103 Hawai'i 401, 422, 63 P.3d 664, 685 (2004)
("In construing statutes, we have recognized that our forenost
obligation is to ascertain and give effect to the intention of
the legislature, which is to be obtained primarily from the
language contained in the statute itself.”) (Citations omitted.)
(Block quote formatting omitted.), the primary principle
extracted therefrom appears to be no more, and no less, than what
is expressly stated -- that an assignee of a chose in action may
pursue it in the assignee’s own name. The statute does not
purport to authorize the assignment of choses in action that vere
Previously unassignable, and there is no justification for such a
conclusion here. Indeed, that interpretation is confirmed by
Hann.

In Hany, Almos Hanu (“Hann”) assigned his chose in
action against Y. Yamaichi ("Yamaichi”) to A.F. Tavares
("Tavares") by written instrument dated July 20, 1926. Hany, 30

Haw, at 960. At trial, Tavares moved to amend his declaration by
 

 

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(1) changing the title to read “A. F. Tavares, Trustee for Almos
Hanu, Plaintiff, vs. Y. Yamaichi, Defendant,” and (2) “adding
paragraph setting forth that ‘on the 20th day of July, 1926,
Rlmos Hanu appointed A. F. Tavares, trustee, to prosecute the
above entitled action and that the said proceedings be conducted
in his name.” Id. The circuit court denied Tavares’ motion,

stating that:

At would not be ‘right’ to the defendant to pernit s substitution
Of parties pleintifl at the stage to which the trial had then

it then being too late to examine the jurors as to
fs of prejudice toward the assignee or thereafter to
challenge then for cause or perenptorily.

   

‘Ide at 960-61. The cizcuit court then directed the jury to
return a verdict in favor of Yamaichi on the grounds that no
right of action survived that could be prosecuted by Tavares.
Id, at 961.

on appeal, this court was presented with the following
two points of error: (1) Did the trial court err in denying
plaintiff’s motion to amend? and (2) Did said court err in
granting the defendant’s motion for a directed verdict?” Id.

With respect to the first issue, this court held that
the denial of Tavares’ motion to amend was within the discretion
of the trial court and was not improperly denied. Id, at 962-63.
We noted that RLH § 2361? conferred upon an assignee of a chose

 

+ RLM § 2361 (1925) provides as follows:

 

Sec. 2361. Assignee; nonnegotiable chose. The assignee of
any nonnegetisbie chose in action, aesigned in writing, may
eintain thereon in his own name any action Which, but for the
Designaent, might be maintained by the agsignors subject, howeve:
fo'all equities ang set-offs existing in favor of the party 1i

(continued...)

  

 
   

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in action the right to pursue that chose in action in the
assignee’s own name. Id. at 962. We further stated that an
assignee could also pursue the action in the name of the
assignor. Id. at 963. We thus concluded that the circuit court
did not err by denying Tavares’ motion to amend insofar as (1)
the action was maintainable in the name of either the assignee or
the assignor, and (2) the assignee was not a necessary party to
the case. Id.

Considering the second point of error, this court held
that the trial court erred by directing a verdict for Yamaichi
because Tavares, as assignee, could have maintained the action in
the name of the assignor, Hanu, as originally filed. Id, at 964.
Accordingly, this court remanded the matter for a new trial. Ide

Hanu’s analysis of RLM § 2361, standing alone, is not
conclusive insofar as it does not expressly address whether RLH §
2361 affects the assignability of claims. However, in Hanu, we
also commented that neither party contested the assignability of
the chose in action:

Tt was not urged that a right of action in trespass for assault

and battery is not assignable in Hawait. The question apparently.

as not considered in the circuit court, Both parties and the

Court assumed that the assignment accomplished a transfer of

Plainei#frs ineorest to Tavares. The question was not raised in

Enis court by the bill of exceptions of the original briefs and

appeared for the first tine upon questions propounded by the court

tercounsel. In the view we take ies decision is not necessary £o

2 determination of the case.

amend wai properly overruled. If the chose in action was

 

   

"1. scontinued
‘against the assignor and which existed at the time of the
Besignment or at any tine thereafter until notice thereat was
Given to the party liable.

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motion ne discretio:

Sort. not Ineroperiy averruled.
Id, at 961-62 (emphasis added). NTB and KOW argue that if RLH §
2361 had the effect of making assignable all previously
unassignable claims, there would have been no reason for this
court to raise the issue of the assignability of rights of action
in trespass for assault and battery. We agree. In light of the
afore-quoted language, Hanu indicates that RLH § 2361 was meant
to permit an assignee of a chose in action to maintain the action
in the assignee’s own name, only to the extent that the chose in
action is among those that ave of an assignable nature. That
conclusion comports with other decisions by this court holding
that certain choses in action are unassignable. See, e.g,
Austin, 6 Haw. at 596 (“[(T]he bankrupt’s conmercial credit is not
among his assets, and the assignees cannot bring action for an
injury to it. The complaint alleges a special damage for which
only the person injured can bring action.”); Sprague v.

fornia Pai 4 Ins. Ltd., 102 Hawai'i 189, 201, 74
P.3d 12, 24 (2003) (“In this case, similar to Austin, the damages

sought for injury to the commercial credit and reputation of Kona

 

Aviation were personal and unassignable. . . . Similarly, the
Gamages sought for loss of business opportunities were personal
and unassignable . . . .").

Therefore, HRS § 634-1 does not dispose of the present
matter, and the question remains whether professional malpractice
clains, breach of fiduciary duty claims, and fraud claims fall

within that class of claims that are assignable

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€. Champerty and Maintenance

We next consider NTB's and KDW’s argument that the
common law doctrines of champerty and maintenance preclude the
assignment of the claims presently asserted by THJ.

In Yan Gieson v. Magoon, 20 Haw. 146 (1910), Justice
Perry defined the terms “champerty” and “maintenance” as follows:

Chanperty and maintenance have been variously defined in the
books, ancient ae well as modern. Courts and text writers seen to
have found sone difficulty in stating precisely what they
consisted of in England. Perhaps the following definition cones
35 near as possible to stating the generally accepted view on the
Subject. chanperty (canpum partire, to divide the land) is "a
Bargain with 2 plaintiff or Gefendant ins suit for a portion of
the land of other natter sued for in case of a successful,
termination of the suit which the chempertor undertakes to carry
fon at hic own expense."--Bouvier. Maintenance is “a malicious or
at least officious interference in a suit in which the offender
hhas no interest, to assist one of the parties to it against the
other with money oF advice, to prosecute or defend the action
without any authority of Law."-rBouvier

   

    

Id, at 155 (Perry, J., concurring). Justice Perry explained
that, historically, contracts involving champerty and maintenance
were viewed as instigating unworthy litigation and contrary to

public policy:

In olden England such contracts were deemed to be contrary to
‘Sound public policy because it was believed that 4 they were
permitted the resuit wouls be co encourage and facilitate the
Stirring up of unworthy Litigation. Various considerations
Contributed to this view. Inthe first place, judges a9 6 rule
were more of less corrupt and the adninistrat ion of Justice was in
Gisrepute. It was believed that powerful lords could and aid
Control the Judges and influence judicial decisions in their. favor
Lrrespective of the merits of controversies. The position of
attorneys, too, wos materially different then from wnat it $2 now.
‘They were not supposed to receive any compensation as such for
their services but merely an honorarium or gift at the option of
the client. Attorneys could not demand oF expect to receive pay
asa matter of right. They Were not permitees £0 make any
Contract whatsoever with their clients. It was deemed to be for
the best Interests of the community that the peverful lords owning
large landed estates should continue in the ownership and
possession of such estates and thet others should not scquire
Eitle to any part of such property. The discouragenent of

 

 

 

 

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Litigation against the lords was for that as well as for other
Hessgns regarded at desirable, The assignment of choses in action

 

flso prohibited.
Id, at 156-57.

However, this court has repeatedly rejected blind
adherence to rules crafted to meet anachronistic societal demands
and has expressed skepticism about the continued potency of the
doctrines of champerty and maintenance. See Henrique v. Paris,
10 Haw. 408, 413 (1896) ("The old rule is a provision of the
feudal law, and grew out of a state of society which does not
exist in these Islends. There is not now and here the necessity
that there was in England in the Middle Ages for laws against
champerty and maintenance to prevent the stirring up of suits for
purposes of oppression[.}"); Yan Gieson, 20 Haw. at 149 (“The
conditions of society under which the law of maintenance and
champerty originated no longer exist.”).

Moreover, the modern trend now favors the assignability
of causes of action, See Osuna v, Albertson, 134 Cal. App. 3¢
71, 83, 184 Cal. Rptr. 338, 345 (Cal. Ct. App. 1982) ("It
suffices to point out that the tendency of modern jurisprudence
strongly favors the assignability and the survivability of things
in action.) (Citation omitted.) (Emphasis removed.) ; Brown vy.
Guar, Ins. Co., 155 Cal. App. 2d 679, 695, 319 P.2d 69, 79 (Cal.
Ct. App. 1958) (“The modern trend in favor of assignability
dispels any remaining doubts concerning the transferability of
the insured’s claim.”); McKenna v, Oliver, _ P.3d _, _, 2006
WL 2564636, *2 (Colo. Ct. App. Sept. 7, 2006) ("Generally,
Colorado law favors the assignability of claims.”); Conrad Bros.

 

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john Deere Ins, Co., 640 N.W.2d 231, 236 (Towa 2001) (*{7]he
law now generally favors the assignability of choses in
action(.]"); Lemley v. Pizzica, 36 Pa. D. & C.2d 327, 330 (Ba.
Ct. Com. Pl. 1964) ("The trend of judicial decisions as to the
assignability of certain causes of action is to enlarge, rather
than to restrict the causes that may be assigned.”) (Citations
omitted.); iisconsin Bankers Ass'n (Inc.) v, Mut, Sava, é Loan
Ass‘n of Wisconsin, 291 N.W.2d 869, 877 (Wis. 1980) (recognizing

‘2 “common law trend favoring the assignability of choses in
action”).

Accordingly, we conclude that the common law doctrines
of champerty and maintenance are not impediments to the
assignability of the claims at issue in this case.

D. Hawai'i Law Prohibits the Assignment of “Personal” Tort
Claims.

hen reviewing the assignability of claims, this court
has repeatedly adhered to the principle that “personal” claims
for relief are unassignable.

1. Austin v. Michiels

‘The earliest reported opinion in this jurisdiction

addressing the assignability of claims is this court's decision
in Austin. The plaintiff, an assignee in bankruptcy, filed an
action alleging that the defendant forcibly entered the
bankrupt's premises and removed property owned by the bankrupt
thereby causing loss and damage resulting in injury to the
bankrupt’s conmercial credit and reputation. 6 Haw. at $95. The

defendant demurred, arguing that the cause of action was not

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assignable. Id. This court first noted that the Bankruptcy Act
of 1684 authorized assignees in bankruptcy to “bring suit for the
goods, or the value, of the bankrupt, wrongfully taken.” Id.
However, we further explained that the Bankruptcy Act of 1884 did
not permit assignees in bankruptcy to take claims that were not
assignable. Id, We explained:

An action for assault or for seduction could not pass to executors
Of assigne, and we may say generally that go action of which the
Gist couiste of injury to the feelings ox in whieh InGury oF

 

Tei a paaravarion. “can be assigned, voluntarily or Py
operation of len
Ida (emphasis added). We thus concluded that a claim for injury

to commercial credit was unassignable:

 

‘The assets pass to the assignees, They may bring action for goods
token away or anjured. “Bot the bankrupt’ s comercial credit is
hot anong ha assets, and the sssignees cannot bring action for an
Tejury co ite “The eémplaint alleges = special danege for which
only the person injures can bring action.

 

Id, at 596.
2. vc fic naux:

In Sprague, Maydwell Millard and Doris Jean Millard
(“the Millarde”), doing business as Kona Aviation, rented @
Grumman aircraft to William and Grace Adams ("the Adamses”), who
departed from Kona International Aiport and never returned. 102
Hawai'i at 192, 74 P.3d at 15, The Millards were thereafter
Anformed that, despite having arranged and paid for an insurance
policy, their aircraft was uninsured when the loss occurred. Id.
at 193, 74 P.3d at 16. The Adamses’ children, Terri Sprague,
Brian Adams, and Dana Adans (“Respondent's”), subsequently filed a
wrongful death action against the Millards individually and as

owners of Kona Aviation. Id. A stipulated judgment and order

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was agreed upon by the Respondents and the Millards, stating
that: “(1) the Respondents be awarded $3 million dollars; (2)
the counterclaim be dismissed; (3) the Millards assign all of
their legal rights against any of the insurance entities and

r their own

 

agents to the Respondents; and (4) the parties b
attorneys’ fees and costs.” Id, The Respondents and the
Millards further agreed that:

(2) the Respondents shall not record, execute, or levy the $3
ilifon dollar Jusgment against the Millards; (2) the Respondents
ree to defend, hola harsless, and indemnify the Millards trom
Tclains that might be brought by the ineurance entities or
jents based on the assignment of rights) (3) the Millards
Cooperate in litigation against the insurance entities and agent:
Gnd’ (4) if the Respondents receive more than £100,000. in
Conjunction with litigation against the insurance entities or
Sgenta, they would pay the Millards $20,000 for the loss of the
aizerafe and attorneys’ fees and costs.

 

     

 

 

 

Respondents then filed a claim against Janes T.
Nottage, Sally Jo Nottage, Allen Tokunaga, Jim Nottage Insurance,
Inc., and Ingurance Resources, Inc. (collectively referred to as
petitioners”), as well as California Pacific Bankers & Insurance
Ltd., Ann Nottage, Ivan Kam, Louan Chandler, and Aviation
Insurance Associates, alleging negligence, fraud, and bad faith.
Id. at 194, 74 P.3d at 17. Following trial, the jury awarded
Respondents $13,000 in special damages and $15,300 in general
damages. Id. On appeal, the ICA, inter alia, affirmed that
portion of the circuit court’s judgment awarding general damages,
holding, in relevant part, that, “as general damages awarded for
a negligence claim were assignable, the circuit court did not err

in permitting this award[.)" Id, at 195, 74 P.3d at 18.

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‘This court, on weit of certiorari, reviewed, inter
alia, the petitioners’ claim that the ICA gravely erred by
upholding an assignment of general damages. Id. at 198, 74 P.3d
at 21. The petitioners did not challenge the assignability of
the underlying claim, id, at 198 n.10, 74 P.3d at 21 n.10, but
asserted that general damages were personal and thus
unassignable. Id, at 198, 74 P.3d at 21.

We agreed, holding that,

 

 

 

in determining assignability, the igsve is not only whether the
Glain'Ie'assignabies but also whether the damages arising from the
Claim are purely personal in nature. Tf so, they
Gpesasgnable, As applied to general damages, it

    

that mast items of general damages are not assignable due to their
personal nature. “General danages ; - - include such itens as
Physical pain and suffering, inconvenience, and 10s3 of enjoyment
Enlch cannot be messured definitively in monetary terms.” State
Harm Wits Auto. Ins. Co. v. Qacanay, 67 Hawai'i 136, 138 n. 3, 952
Prdd 693; €96 ny 3 (ipp-1998) (citation omitted). ‘Inasmuch as
General damages, for the most part, are personal ond unassignable,
the Ica erred by holding that "general damages awarded for 2
hegligence cause of action are assignable.”

 

Ids at 199-200, 14 F.3d at 22-23 (footnote omitted) (ellipses in
original).

ie enphasized, however, that “it is the personal nature
of the damages, not the label, that ultimately determines
assignability.” Id, at 199 n.11, 74 P.3d at 22 n.11 (emphasis
added). Applying the rule, we concluded that the general damages

 

were personal, and thus unassignable!

‘Although loss of business profite may not be the sane
Dusiness cpportunities, the economic nature of such da
similar. we do not think, however, that economic dana
Stherwise known as “out-of-pocket” danages, are automatically
Snsicative of non-personal damages. Depending on the
Clrcunstances of the case, economic damages may be purely personal
Snnacare, thus precluding sseignnent. Whether they are personal
in this case is dependent upon the evidence presented in support
of the award.

in'this case, similar to Austin, the damages sought for

   

 

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Anjury to the commercial cradit and reputation of Kona Avistion
vere personal and unassignable, inasmuch as the Respondents
Glained that the lack of adequate insurance led to the Judgment
entered against the Millards, and consequently, the inability of
the Millards to obtain credit and operate a financially vieble
business. Similarly, the danages sought for loss of business
Opportunities wore personal and unassignable, inasmuch ae there is
po inaieation that they were economically quantifiable

predicated upon the injury to credit and reputation pet
Suefered by the Miilards. Thus the circuit court erred by
instructing the jury that it could award, and the jury erred by
auarding, general damages based on injury tothe commercial creait
and reputetion of Kons Aviation, as well as loss of business
Opportunities. Accordingly, the $15,300 awarded in general
Gonages must be reversed.

 

    

 

  

 

Ida at 201, 74 P.3d at 24.

3. In Hawai'i, the personal/propert:
Survivability, governs whether a cause of action is
assignable.

The general rule gleaned from these cases is that tort
claims that are “personal” in nature are not assignable. As
mentioned, this court has described such “personal” tort claims
as actions “of which the gist consists of injury to the feelings
or in which injury or insult is an aggravation(.)” austin, 6
Haw. at 595. See also 4 J. Pomeroy, Equity Jurisprudence § 1275,
at 793 (5th ed. 1941) (describing as unassignable that class of
toxts “to the person or character, where the injury and danage
are confined to the body and the feelings{)") (footnote omitted) .
‘These “personal” tort claims are distinguished from “non-
personal” or “property” tort claims -- ie., those that arise out
of an injury to the claimant's property or estate. Sa Poneroy,
supra, at 792-93 (describing assignable causes of action as
“those arising from torts to real or personal property, and from
frauds, deceits, and other wrongs, whereby an estate, real or

personal, or injured, diminished, or damaged(]”) (footnote

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omitted); 6A C.5.S. § 39, at 646-47 (1975) ("Generally, a right
of action in tort, which does not apply to the person strictly,
but involves directly or indirectly a right of property or injury
to one’s property or estate, is assignable, especially when the
assignee has acquired title to the property. It has been said

that a distinction is observed betwi

 

n those causes of action for
wrongs which affect the person strictly and all others.”)
(Footnote onitted.).

Because this court has, on one occasion, endorsed the
common law rule that equated assignability with survivability, we
now take a moment to clarify that assignability and survivability
are no longer interchangeable in this jurisdiction.

In Alameda, this court vas confronted with the ‘ssue
whether Frank Alameda (“Alameda”), as administrator of the estate
of Awili Shaw ("Shaw"), could file a claim for arrears of @
police pension in the anount of $1,303.90 due and unpaid to Shaw
during her lifetine. Id, at 668. The defendants, the board of
trustees of the police pension fund of the County of Maui ("the
board"), refused to pay Alameda’s claim on the grounds that the
clain was not one that survived Shaw’s death and, thus, was not
payable to the administrator of her estate. Ida

on appeal, this court concluded ae follows:

fee, pot surtine orises there ia a statate speci ficnly proviaiog

a tratgthsia that thevenuse oF actions which it is
acnitted {Shan sd in her Lifetine, id not survive. The cause

6f action not having survived, her administrator cannot maintain
fan setion to recover it. A Judgment in favor of the board of

 

 

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trustees of said pension fund may be entered.

Id. at 674-75 (emphases added) .
In so concluding, this court relied on several

authoritative works, including 3 Pomeroy’s Eq. Jur. § 1275, which

stated as follows:

CALL things in action which survive and pass to the personal
representatives of 8 decedent creditor as assets, cr continue as
Liabilities against the representatives of a deceased debtor, are,
in general, thus assignable; all of which do not thus survive, But
nich die with the person of the creditor of of the debtor, ave
fot assignable. The first of these classes, according co the
doctrine prevailing throughout the United States, includes al]
laine arising from contract express of implied, with certain
eli“defined exceptions; and those arising fren torts to real oF
Personal property, ond from fraude, deceits, and ceher wrongs,
hereby eh estate, real or personal, 1s injured, diminished, ox
Genaged. The seccnd class embraces ell torts £0 the person oF
Character, where the injury and damage are confined to the body
and the féelings; and also those contracts, often smplied, the
breach of which produces only dixect injury and danage, bodily or
ental, tothe person, such as prosizes to marry, anjuries done by
the want of skill of medical practitioner, contrary £0 his
Implied undertaking, andthe like? and also those contracts, 22

Anna as they are execstory, which stipulate solely for the special
Dacional services, shill, or knowledge of @ contracting party.”

  

 

 

 

   

 

Alamsda, 34 Haw. at 674 (emphases in original) (citing 3
Pomeroy’s Eq. Jur. § 1275).

Subsequent to the Alaneda decision, the legislature
enacted HRS § 663-7, see 1955 Haw. Sess. L. Act 205, § 2, at 185,

which states as follows:

§ 663-7. Survival of cause of action. A cause of action
arising out of a wrongful act, neglect, or default, except a cause
Of action for defanation or malicious prosecution, ‘shall not be
extinguished by resson of the death of the injured person. The
cause of action shall survive in favor of the legal’ representative
of the person and any danages recovered shall form part of the

fe of the

 

   

HRS § 663-7 (1993).

By enacting the foregoing survival statute, the

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legislature has extended the class of causes of action that
survive beyond the class contemplated at common law and described
by this court in Alameda. There is no indication, however, that
the legislature intended a concomitant expansion of the class of
causes of action that are assignable. Indeed the legislature

expressly stated that the purpose of the enactment of a survival
statute was to remedy the “untold hardship and injustice” arising
out of the “archaic” common law doctrine terminating a tort right

of action upon the death of the injured party. Stand. Comm. Rep.

 

Wo. $81, in 1955 House Journal, at 773. The legislature focused
entirely on survivability and made no mention of assignability.
Thus, the survivability and assignability analyses appear to have
been legislatively uncoupled.

nile some jurisdictions have concluded that the
enactment of a broad survival statute governs assignability,?

others view such legislation as disconnecting the tests of

> See Davenport v, State Fare tut. Auto, Ing. Cox, 404 P.2d 10, 12
(ev. 1965) TPIIt 18 now golte generally accepted that the assignability of
the right to sue in tore for personal injuries is governed by the test of
Noivissrship-sivess i the right of action survives the death of the injured
person, that right is assignable. The Fight to sue in tort for persons
Peluries Goes survive in Nevada, NES #1-100(2}, and therefore is assignable.")
(internal citetions omitted.) (Footnote omitted.); Eexcer v; Guevara, 192
Siw.5a'38, 43. (Tex. Ct. App. 2005) ("On the premise that azsignability
Gepended oo survivability, che passage of the Texas Survival Statute meant
Ghat personal injury claine becane agsignable.”); ichola v, United states
Ha. f'Guars cons 125 Newe2d 204, 107 (Ws. 1967) (Since the accepted test of
SEGREMIGSG?' a cause’ ot action in wisconsin is whether it would survive
the seath of @ party, it is necessary to look to our survival statute(.J")
(Footnote onitted:]/ Peterson ¥, Broun, 457 N.W.2d 745, 748 (Minn. Ct. App.
1830) Uiinnescta’s role on aesignability conforms to the general practice
Aesignability is detersined by reference to Minn-stat. § 573.01 (1990) which
governs survival (-]") =

 

 

     

 

 

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survival and assignability.‘ The latter interpretation is

 

+ see Pension ¢ profit shor:
322 S.W-2a 865, 867 Trenn. 1996)
(Although a chose in action must survive to be assignable, not every action
that survives is assignable. For example, elaine for personal injuries
Survive, pursuant to Tenn.Code Ann, § 20-5-102 (1994), but generally aze not
Sssignobie. "In sodern tines, ‘the conaon law est of determining the issue of
ability solely by whether the clain survives the assignor’s death seen
Shtaated and’ aloplaced, “Sthes state courts have experienced cieticeley in
applying the survival test and have approached this issue By considering
factors such as public policy considerations, which vary depending upon the
ticular type of action under exanination.”)”(Pacagraph formatting
Salteed. 1) Bar iva Se Eos, 416 S.We2d 208,
227 (Mo. Ct. App. 1867) ("We Feject the Tule Urge by Harcware Desiers that
wether ® cause of action for personal injury 18 assignable depends solely
pon whether it survives and adopt the rule that such causes of action may not
be assigned prior to judgment for reasons of public policy. We ehink the cast
Law'as given to us by the suprene Court of this state dictater this course, @
course we would willingly follow even though there was no such case lax. We
Ehink the reasons for the applicability ef such @ public policy are as
Eundanental end es necessary today a5 in the days of the origin of this rule.
‘ie do not think economic of social changes since its origin make the reasons
for this humane rule anackronistic.”); Goldfarb v. Reicher, 171 A, 149, 180,
(W.g. 193¢) (rt is a firmly established rule thata right of action for
personal injuries cannot be made the subject of assignment before judgeent, in
the absence of statutory provision to the contrary. Except when otherwise
Provided by statute, nothing 1s assignable, either a law or in equity, chat
Goes not directly or indirectly involve 2 right to property. In other
Jurisdictions the rule is that survival is the test of assignability of rights
ef action ex delicto. Gut the rule is otherwise in this state. While the. .
S act relating to executors and the adainistration of intestates!
ests in the executor or administrater an action against the trespa
any trespass done to the person or property of his testator or intestate
Court of the last resort has declared, and Lt 19 now settied law, that this
Provision dia not abrogate the rule that such causes of action are not
Sssignable before judgment.")" (Internal citations omitted.)) Jags t.. .
Deiitcck, “336 w.w.2d 736, 736 uicn. Ce. App. 1983) (noting thar Miehigan’ =
Survival statute states that “[a]il actions and claims survive death, 1" but
Sdopting the rule that “survivabiiiey ia not the only test,” and concluding
that legal malpractice claims were unassignable based on public policy
Grounds) (sone brackets in originel and some. added); Not
sMC Jeep, Ines, 5€7 $0.24 1034, 1035 (Fla. ct. ABP. 1950) (*[Wle are noe
lunmindful that the assignability of a cause of action is the rule rather than
the exception, and that many causes of action based on tore survive the tort
victin’s death. The ascignability of » tort claim, however, is not controlled
by ite survivability. Florida's courts aghere to the common-lew prohibition
Darring the assignment of personal injury claina.”) " (Internal quotation marke
omitted.) (Internal citations omitted.); $f me
Wciahe Gis con, dSe s.s2a 69, 92 (ark. 1970) {We have no Restestcr ie
joining those courte which hold that s survival statute does not confer the
Poner of essignnent upon the holder of an unliquidated tort claim fer personal
‘eont ined.)

 

      

 

 

    

 

    

 

   

 

  

 

 

 

 

   

 

 

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more consistent with Hawai'i law. Jo wit, in Sprague, this court
expressly reaffirmed Austin’s holding that injury to commercial
credit is personal and unassignable. In so doing, this court did
not mention either survivability or HRS § 663-7, Pursuant to HRS
§ 663-7, the cause of action in Sprague, alleging injury to
commercial credit, would have survived the death of the claimant,

insofar as it (1) arose ovt of a wrongful act, and (2) did not

 

 

 

“Ls jscontinves)
injuries.) Standard Chartered PLC v. Price Waterhouse, 9¢5 P.2d 317, 327
(Ariz. Ct. App. 1996) ("[T]he Arizona Courts detached the rule of non”
sbsignablisty cf personal injury cleins from the survivability standard and
Sopparted ton shdependent policy grounds. In eile Hutus

Gov. Lea, 2 Arizapp. $38, S41, 410 P.2d 495, 498 (1966), we explained that

Efevnen-assignability rule prevents unscrupulous people’ from ‘traffic{king]
inlaw suite for pain and suffering.'") (Some brackets added and sone in
original.); Town £ Country Bank of dprinafield v, Country Mut, Ins. Cou, 459
Nibs2d 629, 640 [ITl. Ce. App. 1908) ("Illinois law has established that a
Cause of action for personel injuries may survive by virtue of the Survival
het, but it ig neverthelest not assignable, on public policy grounds. Two
Feasons were given for this principle: (1) A lstigious person could harass
tn annoy’otnere ig aliowed fo purehase elaine fer pein tnd suttering and
Pursue the claims in court ae ‘and (2) all assignsents are vod
Unless ine sasignor'has either actually of potentially the thing which he
attempts to assign.*], (Internel citations omitced.);
Hager 16e s-E-24 157, 161 tw, Va, 1969) (stating that “the Legislative
Ghactnent of the provisions of Code, 5S-7-5 and 6, 25 amended, which pertain
fo the survivability in various situations of a wrongful death action and the
fecovery cf hospitsl, nedical and funeral expenses therein, and Code 55-7-8
and 8a, as anendes, which provide for the survivel and revival of certain
actions whieh did fot survive at common law... relate only to the
Survivability and/or revivabilsty of certain specific claims and inno way
alter or amend the common law with respect to the assignability of such
Glaine(1"}7 Hagener v. MeDonala, 503 N-W.2é 186, 151 (linn. Ct- App. 1983)
(today, it seens anachronistic to reaclve the isaue of the assignebility of a
by deciding whether such a claim would survive the
the case with the cosmon law, the rule
hes outlived the reason for ite creation. “The custons, beliefs, of needs of
a primitive tine establish a rule or formula, In the course of the conturies
the custom, belief or necessity disappears, but the rule remains.’ Where such
Se the case, this Court has been Willing to ‘re-examine the basis of the
File.’ “Assignment should be permitted or prohibited based on the effect it
will Lixely have on modern society and the legel system in particular. Thos,
te consider issuer of public policy rather then the statutory survival test to
‘enine whether legal malpractice claims are assignable.")" (Sone block
‘and paragraph formatting omitted.) (Internal citation omitted.)

 

 

 

 

 

 

  

 

   

 

    

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assert a claim for defamation or malicious prosecution. Thus,
this court's reaffirmation of the validity of Austin’s conclusion
~ that 2 claim alleging an injury to comercial credit is

unassignable ~~ implies that survivability is a non-factor in the
assignability analyss.

 

Given the foregoing, we now explicitly abandon
reference to survivability when analyzing the assignability of a
claim for relief and adhere to the principle described by Austin
Lg., the personal/property dichotomy.

 

and Sprague
E. TM's Claims Are Not “Personal.”

Having concluded that the proper inquiry in this
jurisdiction is whether the cause of action alleges a personal
injury or an injury to property, our subsequent obligation is to
analyze the specific claims presented in the case at bar. To
that end, we have previously focused our attention on the injury
alleged. See Sprague, 102 Hawai'i at 200, 74 P.3d at 23
("(Dlealing with assignment of @ claim, this court focused on the
in that case, damages for injury to the

commercial credit and general reputation of a business that was

 

damages requested:

allegedly forced into bankruptcy.”) (Footnote omitted.)
(emphasis added.). That focus recognizes the truism that a
Clain’s title (i.e., “professional malpractice,” “breach of
Indeed, a

 

fiduciary duty,” “fraud,” ete.) is not dispositiv
“fraud” may harm either person or property. Clains for
“professional malpractice” and “breach of fiduciary duty” share
the same chaneleonic quality.

Here, the two-count complaint asserts non-personal

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injuries. The first count alleges that “Ishimura Building was
damaged by the payment of the $400,000 brokerage fee and suffered
additional damages to the extent the Coconut Plaza Hotel was sold
for less than its fair market value.” The second count alleges
that “Ishimura Building was induced to sell the Kailua
Professional Center for $2,000,000.00 less than its appraised and
fair market value and has been damaged by said amount.” These
allegations consist of direct and quantifiable economic injuries?
to the estate or property of Ishimura Building, as opposed to
physical, mental, or reputational harm. Given the non-personal
nature of the injuries alleged, we are compelled to conclude that
the professional malpractice, breach of fiduciary duty, and fraud
claims presented in the present case are assignable.

We are not unsympathetic to the view that public policy
may nevertheless preclude such assignments insofar as it would
arguably facilitate the merchandising of non-personal tort
claims. However, questions regarding the wisdom of permitting
such assignnents are more appropriately directed to the
legislature, which is better positioned to balance the policy
considerations and potential consequences that will flow from

such a decision.*

 

* However, sn allegation of economic harm is not always indicative
of non-personal injury. See Sprague, 102 Mawai'i at 201, 74 isd at 24 ("We
So not think, however, that economic danages, otherwise know as ‘out-of-
pocket’ danages, are automatically indicative of non-personal damages
Depending on the circumstances of the case, economic damages may be Purely
personal in nature, thus precluding assignment.)

 

 

 

+ te have, in the past, exhibited auch restraint when faced with

policy decisions of sinilar magnitudes. See State vy, Aiuohi, 109 Hawai'i 115,
(continved. .-)

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IIT. coNcLUSION

Based upon the foregoing analysis, we (1) hold that
MJ's causes of action for professional malpractice, breach of
fiduciary duty, and fraud are of an assignable nature, and (2)

answer the certified question in the affirmative.

on the briefs:

Edward J. Bybee for
plaintiff-appellant

George T. Okamura of
George T. Okamura, AAL, ALC
and James N. Duca’ of Kessner
Duca Umebayashi Bain 6
Matsunaga for defendant-
appellee Nippon Trust Bank,
aka Nihon Shintaku Bank

 

Robert J. Snolenski of
Smolenski & Wooddell for
defendant-appellee Kelley
Drye & Warren LLP

*L cscontinued)
129, 125 F.3d 1210, 1224 (2005) (“Although we recognize that there may be
significant policy implication? and social ramifications surrounding the
Present issue, it is well established that the legislature is best sulted to
Sssess guch considerations."); Stat

Nawai's 142, 182, 60 P.3d 321, 332 (2003) (stating that
are expressly within the constitutional purview of the legislature”);
01 Hawai": 3, 10, 61 F.3d S14, 521 (2002) (observing that “[w]hile there nay
be sound policy reasons to allow a choice of evils justification defense for
the protection of unborn children, the adoption of such a public policy is
best! left to the state Legislature"): in Ke Water Use Permit Applications, 94
Hawai'i 97, 192, 9 P.3a 403, S04 (2000) (etating that vthe “how” or the public
Policy making function was properly reserved for the legislature”); ge vs
Sorrecedare, €3 Hawai: 18¢, 171, $25 P-34 324, 341 (1996) (stating that broad
Policy decisions are vbest left to the branch ‘of government vested with the
Buthoréty and fact finding ability to make such broad public policy decisions,
namely the Haxai't Legislature”)

 

 

      

 

 

 

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