Opinion ID: 578000
Heading Depth: 2
Heading Rank: 1

Heading: katayama's claim

Text: 36 The district court had three bases for denying Katayama's breach of contract claim, any one of which would be sufficient for this court to affirm. We find that all three bases have been established.
37 The district court held that the January 20, 1987, letter written by Heller to Katayama constituted a partially integrated final agreement between the parties; and, Katayama's commission was conditioned upon Heller's receipt of $77.5 million at closing. (District Court's Decision Decision 6, Conclusions of Law CL 9) The court based this decision on the express language of the agreement which stated, [w]e further agree to remit a commission of U.S. $2.1 million to agents in the United States ..., this latter payment to come from the U.S. $77.5 million we are to receive and will be paid at closing. (Decision 6, emphasis added) We concur with the district court's holding that Heller was not obligated to perform because the condition of receiving the $77.5 million had not been satisfied. (Decision 6) 38 We reject Katayama's claim that the January letter was ambiguous and find that the district court arrived at the only reasonable interpretation of the letter. See Sturla Inc. v. Fireman's Fund Ins. Co., 67 Haw. 203; 684 P.2d 960, 964 (1984) (ambiguity exists only when the contract taken as a whole is reasonably subject to differing interpretation.) 39 We also reject Katayama's argument that Heller demonstrated a bad faith effort to defeat the condition precedent by purposely negotiating for a price below the requisite $77.5 million. See Reality Mart, Inc. v. Aina Alii, Inc., 61 Haw. 526, 530, 607 P.2d 408, 411 (1980). The facts indicate that Heller expected a higher purchase price from IBJ, and made a low-ball counter-offer only because Katayama assured him it would yield a higher final offer. This demonstrates Heller's interest in negotiating a higher, not lower, price. Heller would gain nothing by negotiating for less to avoid paying Katayama, particularly when the agreed price was much more than $2.1 million below the floor amount of $77.5 million.
40 The Hawaii Supreme Court defined equitable estoppel as follows: where one by his words, or conduct, wilfully caused another to believe the existence of a certain state of things, and induced him to act on that belief so as to alter his previous position, the former is precluded from averring against the latter a different state of things, as existing at the same time. Anderson v. Anderson, 59 Haw. 575, 587-88, 585 P.2d 938, 946 (1978). 41 The facts of the case demonstrate that Katayama caused Heller to believe and rely on the existence of a condition precedent. Katayama, an experienced attorney, testified that he realized the letter contained an erroneous condition precedent, but he only corrected the error in his mind; Katayama did not discuss his concerns with Heller (Decision 8); and, Katayama later told Oku that the terms of the January 27th letter were satisfactory. (Decision 8) Thus, Katayama is estopped from denying the existence of a condition precedent in the January 20, 1987, letter because he did not inform Heller of the perceived error.
42 Katayama acted as a real estate broker, as defined by Hawaii Revised Statute § 467-1 (1985) 2 , during his participation in the Ilikai sale as evidenced by the following facts. He solicited IBJ and approached Heller with IBJ's offer on January 19, 1987; he discussed negotiation strategies with Heller and Covella the night before their meeting with IBJ on January 26, 1987, and met with Tamaki and Oku that same evening to discuss various deal points; he continued to participate in negotiations from February 1-6, 1987, by advising Heller on the counteroffers he should make, and by advising Heller during the final negotiations in Hawaii from February 10-12, 1987. 43 Since Katayama did not have a Hawaii real estate license, as required by Haw.Rev.Stat. § 467-7 3 , he is barred from collecting the fee pursuant to HRS § 487-13. (Decision 4) 44 We reject Katayama's argument that he is not subject to the Hawaii's licensing provisions since his activities were conducted out-of-state. Without reaching Katayama's territorial argument, we find that Katayama's real estate broker activities within Hawaii were sufficient to bring him within the scope of the licensing statute. 2. HELLER'S COUNTERCLAIM 45 In his counterclaim for fraud, Heller alleges that Katayama induced him to rely on false statements regarding (1) the IBJ Chairman's approval of the Ilikai purchase; (2) the net recovery to the Defendants; and, (3) Katayama's Japanese political connections. He claims that his reliance resulted in damages between $9.2 million and $16 million. 46 The district court rejected Heller's counterclaim holding: (1) Heller did not establish fraud by clear and convincing evidence; (2) Heller failed to show his reliance on Katayama's statements was reasonable, since Heller knew Katayama had a history of breaching fiduciary duties as evidenced by Katayama's bad faith dealings with Gotoh; (3) Heller did not establish the element of proximate cause because he could have entertained other offers to purchase the Ilikai until Katayama's representations were borne out; and, (4) the damage claim was speculative. (Decision 13-14) 47 To establish fraud there must be clear and convincing evidence showing that (1) false representations were made; (2) with knowledge of their falsity; (3) in contemplation of the other party's reliance upon these false representations; (4) which were, in fact, relied upon. Hawaii's Thousand Friends v. Anderson, 70 Haw. 276, 286, 768 P.2d 1293, 1301 (1989). In addition, the injured party must prove he suffered substantial pecuniary damages. Id. A. Elements of Fraud 48 The district court found, and we concur, that the first three elements of fraud are met because Katayama knowingly made the following false representations in contemplation of Heller's reliance: (1) on January 19, 1987, Katayama falsely represented that IBJ and its Chairman had decided to acquire the Ilikai at a purchase price in excess of $77.5 million that would net $77.5 million to Heller (FF 119); and (2) Katayama falsely represented that he had direct contacts with IBJ's Chairman Ikeura. (FF 120, 121, 56). 49 The only element at issue is reliance. The district court found that Heller had not established this element because his reliance on Katayama's false representations was unreasonable. (Decision 13) 50 Heller argues that Hawaii has not adopted a reasonableness standard for the reliance element of fraud. In dicta, two cases from the Supreme Court of Hawaii and two cases from the Intermediate Court of Appeals of Hawaii did not modify the reliance element with a reasonableness standard. See Hawaii's Thousand Friends, 70 Haw. at 286, 768 P.2d at 1301 (The evidence must show that ... (4) plaintiff did rely upon [the false representations]); Kang v. Harrington, 59 Haw. 652, 587 P.2d 285, 289 (1978) (it must be shown that ... plaintiff did rely upon [the false representations]); Wolfer v. Mutual Life Ins. Co. of New York, 3 Haw.App. 65, 641 P.2d 1349, 1353 (1982) (the plaintiff must show that ... the plaintiff did rely on [the false representations] and suffered damage); Eastern Star, Inc., S.A. v. Union Bldg. Materials Corp., 6 Haw.App. 125, 712 P.2d 1148, 1158 (1985) (it must be shown that ... the plaintiff did rely upon the false representations). 51 The single Hawaii case which deals with reliance in a non-dicta setting, applied an utterly unreasonable standard to a bizarre scenario. In Stahl v. Balsara, 60 Haw. 144, 587 P.2d 1210 (1978), the Supreme Court of Hawaii denied the plaintiff's fraud claim holding that plaintiff's reliance on a fraudulent fortune-teller was utterly unreasonable since it constituted mere prognostication or prophesy as to the happening of a future events and did not concern an existing material fact. Id. at 1214. 52 This court, in dicta, has interpreted Hawaii law by modifying the reliance element with a justifiable standard. Bulgo v. Munoz, 853 F.2d 710 (9th Cir.1988) (To prove fraud the plaintiff must establish ... the plaintiff justifiably relied upon those false representations to his detriment.) However, this case relied on In Re Hawaii Corp, 567 F.Supp. 609, 630 (D.Haw.1983), a federal district court case which, in turn, relied on Bank of Hawaii v. Allen, 2 Haw.App. 185, 628 P.2d 211, 213 (1981), a Hawaii Intermediate Court of Appeals case which dealt with fraudulent inducement, a contracts cause of action, not common law fraud tort cause of action. 53 Inasmuch as Hawaii courts have not expressly addressed this issue, we must attempt to determine how Hawaii would have decided if it had. Since reasonableness is the traditional reliance standard commonly adopted by other states (see RESTATEMENT (SECOND) OF TORTS § 546 (1977)), we conclude that Hawaii, if presented with the appropriate case, would probably join in adopting such a standard. 54 Applying the reasonable reliance standard, we return to the district court's decision. The court held that Heller's reliance on Katayama's false representations was unreasonable because he knew that Katayama had breached a fiduciary duty to his former client Gotoh. (Decision 13-14) The court implies that such knowledge should have put Heller on notice that Katayama was not to be trusted. 55 The district court's decision that Heller knew of Katayama's double-dealings with Gotoh contradicts its Findings of Fact that Heller did not know Katayama was Gotoh's attorney until pre-trial discovery in the present case (FF 20), and that Katayama's credibility was enhanced by the quality of his counselling during the Gotoh negotiations (FF 33). 56 Moreover, other Findings of Fact indicate that Heller had reason to trust Katayama. The court found that Katayama had apparent expertise and experience in dealing with Japanese businessmen which contributed to his credibility with Heller, a novice about such matters. (FF 33). The court also found that Heller and Katayama had engaged in other business dealings (e.g., Katayama made a substantial loan to Heller) which, impliedly, did not give rise to any questions of Katayama's trustworthiness. (FF 33) And, the court expressly found that Heller's confidence in Katayama was buttressed when IBJ sent lesser officials to negotiate the final contract, confirming the accuracy of Katayama's assertion that direct negotiations between principles is a breach of Japanese protocol. (FF 100) 57 Heller diligently and repeatedly sought, and received, assurances from Katayama about IBJ and the deal. For example, the district court found that on February 6, 1987, Heller asked Katayama about his Japanese contacts, and Katayama expressly reconfirmed that the transaction was on track; the Chairman had blessed this deal, it's got to go down. (FF 90) 58 In light of the district court's Findings of Fact, we remand this issue for further findings to support the court's conclusion that Heller's reliance was unreasonable.