Opinion ID: 2648409
Heading Depth: 1
Heading Rank: 2

Heading: Option to Purchase Landlord’s Interest.

Text: 10.01 Tenant’s Option to Purchase. If at any time during the first ten (10) years of the Lease, Tenant desires to sell Tenant’s interest in this Lease, and Landlord’s interest in this Lease and the fee simple title to the Land (collectively called “leased fee interest”) for the sole purpose of selling to a third party Tenant’s leasehold interest and Landlord’s leased fee interest (so that such third party would own the Land in fee simple), then Tenant shall give Landlord prior written notice of the terms and conditions of the proposed sale and the name of the proposed buyer. Tenant shall have the right to purchase Landlord’s leased fee interest under the terms and conditions outlined below by giving Landlord written notice of Tenant’s election to purchase Landlord’s leased fee interest, in writing, within thirty (30) days after receipt of an offer from a prospective buyer. If Tenant exercises its right to purchase Landlord’s leased fee interest, then Tenant shall pay Landlord the amount specified below within the time proposed by the specified buyer, not to exceed six (6) months after Tenant’s election to purchase Landlord’s leased fee interest. If the prospective buyer is affiliated with or has had a business relationship with tenant, upon request of Landlord, Tenant shall furnish proof satisfactory to Landlord that the sale is not a sham sale for the purpose of subsequent resale, to avoid the payment of the percentage price to Landlord under Section 10.02. If Tenant fails to furnish satisfactory proof, Landlord may refuse to honor the exercise of such [O]ption. . . . 10.02 Purchase Price for Landlord’s Leased Fee Interest. The purchase price for Landlord’s leased fee interest shall be SIX MILLION AND NO/100 DOLLARS ($6,000,000.00) plus fifty percent (50%) of the “Net Proceeds of Sale” in excess of NINE MILLION AND NO/100 DOLLARS ($9,000,000.00). As used herein, “Net Proceeds of Sale” means the Purchase Price paid by the prospective buyer less real estate brokers commissions and customary closing costs, provided that such commissions and closing costs shall not exceed four percent (4%) of such Purchase Price . . . . (Emphases added.) The lease agreement also stated the parties had negotiated the agreement at arm’s length and did not intend to form a partnership or joint venture: 9.12 No Party Deemed Drafter. All provisions of this Lease have been negotiated at arms length and with full representation of legal counsel and neither party shall be deemed the drafter of this Lease . . . . 9.13 No Partnership Intended. Landlord and Tenant hereby agree that Landlord in no event and for no purpose is a partner of Tenant in the conduct of any of its businesses or 4 FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER other affairs or a joint venturer or member of a joint enterprise with Tenant. (Emphases added.) In 1999, Petitioner could not make its rent payments under the lease agreement and consequently defaulted. Subsequently, Pacific Century Trust, a division of the Bank and one of the owners of the Property, filed suit seeking a writ of possession and damages. However, prior to the conclusion of that action, Petitioner filed for bankruptcy in the United States Bankruptcy Court. The bankruptcy court approved the sale of Petitioner’s leasehold interest in the Property to Loko Maui, LLC on November 1, 2001,2 in exchange for the payment of Petitioner’s arrearage and $250,000. As a result, Pacific Century Trust’s suit was dismissed. On June 25, 2007, Petitioner filed a Complaint, initiating the instant case. The Complaint alleged that Respondents “had no intention of allowing [Petitioner] to exercise the Option,” and asserted claims against Respondents for fraud, conspiracy to defraud, breach of fiduciary duty, and tortious interference with prospective business advantage. B. At trial, George Weir (Weir), the Bank’s senior executive officer at the time it entered the agreement with 2 The actions that form the basis of Petitioner’s claims that Respondents prevented Petitioner from exercising the Option took place prior to the sale of Petitioner’s leasehold interest in the Property on November 1, 2001, while Petitioner remained a tenant of Respondents under the terms of the lease agreement. 5 FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER Petitioner, testified as to whether Respondents owed Petitioner any fiduciary duties: Q. [by Petitioner] All right. So if the [O]ption is exercised, you’d have to give clear title, wouldn’t you?
. . . . Q. You have to hold it in effect for [Petitioner’s] benefit, if they exercise the [O]ption? A. At the time – if they were to exercise their [O]ption and we were to accept it, at close of escrow, we’d have to deliver clean title. Q. So you have an obligation to [Petitioner] to make sure that . . . if the [O]ption is in fact exercised, you’re going to give him clear title? A. At close of escrow, yes, sir. Q. So in effect then, [Petitioner] would be a beneficiary and you would have the obligation to make sure nothing happens to the land if the [O]ption is closed? A. At the time of the close of escrow we’d have to deliver it clear, as I say. . . . . Q. So you have an obligation to make sure that either nothing happens or if something does, you’ve got to fix it? A. True. . . . . Q. Okay. Now, would you say that that puts you in a fiduciary relationship with them? A. It’s a stretch. I’ll take that. Q. You’ll accept that? A. A definition of a fiduciary is one who has a confidential relationship with another, which could extend to husband and wife. So sure. (Emphases added.) Weir later clarified his testimony on crossexamination: Q. [by Respondents] What did you mean by your statement [that you owed a fiduciary duty to Petitioner]? A. [by Weir] Well, the – I don’t know. I guess you – there’s fiduciary with a little “F” and fiduciary with a big “F.” In my business, it is – we have a – as I mentioned earlier, we have a statutory law, a legal responsibility as a fiduciary as well as a common law, you know, tradition, responsibility toward our trust beneficiaries. When I said it was a stretch, you know, you have an obligation. I suppose you could call it a fiduciary duty. When you enter into a contract with someone, you have an obligation, legal obligation or moral obligation, honesty, fair play between two parties who enter into an agreement. That’s just the way we work. That’s the way we all work. But as far as the true fiduciary duty, my true fiduciary duty – and that’s, again, with a big “F” – to those participants in that fund, our client, our beneficiaries, and that obligation under the contract to 6 FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER deal fairly and honestly with Mr. Takeuchi,3 certainly. (Emphases added.) Following the conclusion of Petitioner’s case in chief, Respondents moved for JMOL, arguing inter alia that “no fiduciary duty was owed to [Petitioners]” by Respondents. The court granted Respondents’ JMOL on this claim. The jury was asked to render a special verdict on Petitioner’s remaining claims. As to the fraud in the inducement and conspiracy to defraud claims, the jury found that Petitioner had failed to prove its case by clear and convincing evidence. But, on the tortious interference claim, the jury found that Petitioner had met its burden of proving each of the four elements of its claim. The jury therefore awarded Petitioner $680,000.00 in general damages and $770,821.00 in punitive damages. However, Question 7 on the special verdict form read: [Petitioner] initiated this lawsuit on June 25, 2007. Did [Respondents] meet their burden of proof by a preponderance of the evidence that [Petitioner] was either aware of its interference claim or had enough information to warrant an investigation which, if reasonably diligent, would have led to discovery of the interference two or more years prior to June 25, 2007? (Emphases added.) The jury answered “Yes” to Question 7. The verdict was read in open court on June 10, 2009. The jury was polled, and eleven of the twelve jurors stated that they agreed with “all of the answers read into the record.” 3 “Mr. Takeuchi” refers to George Takeuchi, the manager of Petitioner. 7 FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER Following the entry of the verdict, the court informed the jurors that they were discharged: After you have been discharged from your jury service in this case, you are free to discuss this case with anyone. . . . However, you should be careful not to discuss your thoughts or any other juror’s thought processes, in other words, why or how the jurors reached or did not reach their verdict or verdicts. To do so would violate the confidentiality of the jury deliberation process. If you wish to report any improper conduct by any juror or jurors during the deliberations that may have been prejudicial to either party or that may have compromised the fairness of your jury deliberations and/or verdicts, then please do so by notifying the Bailiff before you leave the courthouse. If at some point after you’ve already left the courthouse you want to contact the [c]ourt about the above concerns, please send a letter to the [c]ourt. The [c]ourt upon review of these matters may summon some or all of the jurors back to court to hold a hearing to determine whether there was any misconduct that may have been prejudicial to the parties. . . . . [T]hank you to each and every one of you for your dedicated service as jurors in this case. And at this time, you are discharged from further jury service in this matter. And the Bailiff will escort you out of the courtroom. Thank you so much. (Emphases added.) Later that day, the court went back on the record. With the jury not present, the court stated: I make it a practice to go into the jury room after the trial is over to meet with jurors to thank them[.] . . . . And while I was doing that, statements were made that could potentially raise an issue relative to the verdict of the jury. I disclosed this to the parties and asked the parties if they desired any additional disclosure from the [c]ourt. The Plaintiff has requested further disclosure. The defense has requested or stated that the trial was over and the verdict has been made a part of the record and that the proceedings were concluded, and therefore, objects to any additional disclosure . . . . . . . . So I’m making this disclosure to the parties and encourage a briefing . . . as well as my own research on the issue and also attempt to preserve the status quo to the extent that that can be done to instruct the –- bring the jury back, they’re still here, and to simply instruct them that they’re not to discuss the case with anyone or allow anyone to discuss the case with them. . . . . THE COURT: So, but I wanted to do some research on this. So, this isn’t the final hearing on this. (Emphases added.) The court explained that, to “preserve the 8 FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER status quo” it would “bring the jury back” because “they’re still here.” The court then recalled the jury and told the jury: [E]arlier I gave you an instruction, and I’m going to need to rescind that, so that’s the reason we had you return to the courtroom. . . . And that is I read you an instruction that began, “After you have been discharged from your jury service in this case, you are free to discuss this case with anyone.” And I went through the balance of the instruction. I’m going to rescind that and instruct you that, at this point, you are not free to discuss this case with anyone. So I would ask that you or I’ll instruct you not to discuss this case with anyone, nor allow anyone to discuss the case with you until otherwise ordered by the [c]ourt. And I apologize for giving you one instruction and now giving you the opposite instruction. . . . I mean you’re instructed not to discuss this case with anyone, nor allow anyone to discuss the case with you until I otherwise instruct you. All right. And I will -- I won’t just leave that hanging. I will give you a further instruction on this at the appropriate time. So, please keep that in mind at all times. And again, thank you very much. We’ll release you at this time subject to potential recall. (Emphases added.) The jury was then excused. On August 7, 2009, the court conducted a “colloquy” with the jurors regarding the verdict. During the colloquy, the court read the verdict to each juror and asked the juror if the verdict accurately reflected the juror’s decision. Jurors 3, 6, 11, and 12 stated that the verdict form accurately reflected their answers to the special interrogatories. Juror 4 stated that she could not remember her original answers to the verdict form. Juror 5 was the juror who had not agreed with the original verdict, and therefore stated that he voted “no” on Question 7. Jurors 2, 7, 8, 9, and 10 stated that the answer to Question 7 was accurately recorded as “Yes,” but that the jury 9 FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER had misinterpreted Question 7. For example, Juror 2 stated: [JUROR 2]: When we had our discussion with [the court] and [the court] commented on the decision, that [Petitioner] wasn’t within the statute of limitations, and that was not what we understood we had answered. So somehow there was a misunderstanding with the way the question was phrased. We felt - otherwise, we wouldn’t have put the figures in there, and we wouldn’t have said yes to interfere - I guess you could still say yes to interference and still say it’s not within the statute of limitations. But we felt there was interference and that it was within the statute of limitations but there was not conspiracy. (Emphases added.) Similarly, Juror 8 explained that the jury “misunderstood” the question. Juror 1 simply stated that the jury’s answer to Question 7 was “no instead of yes.” The court then discussed the colloquy with counsel for the parties, outside the presence of the jury. The court declined Petitioner’s request to further examine the jurors and decided to allow the parties to file further motions. On August 17, 2009, Petitioner filed a Motion to Correct Verdict and Enter Judgment, asking the court to strike “the answer ‘Yes’ to Verdict Form Question 7 for ‘Interference with Prospective Business Expectancy,’” and to enter judgment in favor of Petitioner. On July 8, 2010, the court issued findings of fact (findings), conclusions of law (conclusions), and an order denying Petitioner’s Motion to Correct Verdict and Enter Judgment. The findings and conclusions stated in pertinent part: [Findings] . . . . 4. The verdict was read into the record on June 10, 2009. 5. After the verdict was read into the record, the jurors were individually polled to determine whether the verdict as read reflected their verdict. Through the polling, eleven (11) jurors responded in the affirmative, with one (1) juror responding in the 10 FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER negative. 6. The verdict was then made a part of the record of these proceedings. 7. The [c]ourt then discharged the jury. 8. After meeting with the jurors in order to thank them for their services, the [c]ourt informed the parties that there may be an issue concerning the verdict. 9. The jury was returned to the courtroom, instructed not to discuss the case with anyone, then released subject to potential recall. The [c]ourt’s instruction to the jury was intended only to preserve the status quo. 10. The [c]ourt inquired with the parties as to whether the parties would like disclosure of the statements made to the [c]ourt by the jurors. . . . . 12. Given the Defendants’ objection to disclosure, the [c]ourt did not disclose what had been said to the jury, and invited briefing as to the appropriate course of action. 13. Following review of briefing by the parties, the [c]ourt ordered that the jury return for a colloquy to take place on August 7, 2009. The colloquy was intended to develop a factual record regarding the verdict and the underlying circumstances; it was not intended as a repolling of the jury. 14. During the colloquy on August 7, 2009, certain of the jurors expressed confusion as to the legal effect of their factual response to Question 7 under the cause of action for Interference with Prospective Business Advantage on the Special Verdict Form . . . with certain of the jurors stating that they intended a different result. . . . . [Conclusions] . . . . 3. Under Hawai#i case law, including [Cabral], this [c]ourt is not at liberty to take corrective action based upon the August 7, 2009 colloquy of the jurors. On April 1, 2010, [Petitioner] filed a Motion to, inter alia, “Resubmit to Jury,” seeking “an order to resubmit . . . Question No. 7 to the jury.” Petitioner asserted that the question could be resubmitted to the jury because “the jury ha[d] not been discharged.” On July 8, 2010, the court filed an order denying plaintiff’s motion to resubmit. In the order, the court indicated that “the jury was discharged on June 10, 2009, and remains discharged at this time.” The court maintained that “the instruction that the court rescinded was an instruction that told the jury what they [sic] can and cannot do subsequent to being 11 FOR PUBLICATION IN WEST’S HAWAI#I REPORTS AND PACIFIC REPORTER discharged.” According to the court, it “never intended to rescind the order discharging the jury and the court’s order discharging the jury has not been rescinded.”