Opinion ID: 1190415
Heading Depth: 4
Heading Rank: 5

Heading: Damages denied for future payments

Text: In COL Nos. 26 and 27, the trial court ruled that WBIC was not entitled to compensation for payments that it agreed to make to the Group, under the Joinder Agreement, as partial reimbursement for the Group's future lease rent and real property tax obligations because these payments were beyond the contemplation or foreseeability of the parties when they negotiated the Indemnification Agreement. WBIC contends that the trial court erred by misapplying the doctrine of foreseeability, thereby depriving WBIC of the full compensation to which it was entitled as a result of Amfac's breach of the Indemnification Agreement. We agree. It is now a well established principle in the law of damages that, when one sustains a loss by breach of a contract, he is entitled to have just compensation commensurate with his loss and that damages awarded should be in such amount as will actually or as precisely as possible compensate the injured party. Ferreira v. Honolulu Star-Bulletin, Ltd., 44 Haw. 567, 573-74, 356 P.2d 651, 655, reh'g denied, 44 Haw. 581, 357 P.2d 112 (1960). The Ferreira rule is limited by the doctrines of legal causation and foreseeability enunciated by the court in Jones as follows: The general rule is that in an action for damages for breach of contract only such damages can be recovered as are the natural and proximate consequence of its breach; that the damages recover-able must be incidental to the contract and be caused by its breach; as the cases express it, such as may reasonably be supposed to have been in the contemplation of the parties at the time the contract was entered into. 41 Haw. at 393 (citation omitted) (quoted in Bow, 6 Haw.App. at 293, 719 P.2d at 1106). Kaneshige testified that at the first meeting between representatives of Amfac, WBIC, and the Group, held prior to January 31, 1985, Saunders took the position that the Group required partial compensation both for past rent allocable to the use of the sewer easement and for future rent for the sewer easement so long as he and ... [the Group] had [a] leasehold position on the property. He testified that Saunders wanted to determine the amount to be paid for the Group's consent to the sewer easement based on the percentage of land area that was taken by the sewer easement and he did it on a two-dimensional basis; put differently, Saunders wanted to use the ratio of the square footage of Easement H to the total square footage of Lot 30-A multiplied by the Group's total rent obligation with respect to Lot 30-A to determine the consideration to be paid by WBIC for the sewer easement. Although the exact amount of the consideration to be paid by WBIC for the sewer easement was not specifically quantified at the meeting, the arithmetic computation could readily have been performed because the Group's rent obligations were expressly fixed by the master lease and sublease governing Lot 30-A. Indeed, Saunders performed this precise computation when he derived the fourteen percent payment figure reflected in the Joinder Agreement. [16] Therefore, at the time the Indemnification Agreement was executed, both Amfac and WBIC were aware that the Group would require lump sum consideration from WBIC representing past use of the sewer easement, as well as future monthly payments for its use. Both parties were likewise aware of the formula by which the Group would compute these amounts. Although the trial court correctly concluded in COL No. 17 that [f]oreseeability does not require an actual recognition by the parties at the time of contracting of the details or specifics of the injury or the damages which thereafter followed, it nevertheless restricted WBIC's recovery to the lump sum payment for past use of the sewer easement (COL Nos. 24 and 25) and did not hold Amfac liable for future payments to the Group for the same use (COL Nos. 26 and 27). COL Nos. 24 and 25 are logically inconsistent with COL Nos. 26 and 27 because WBIC's obligations to compensate the Group for past and future use of the sewer easement were equally foreseeable and contemplated by the parties at the time the Indemnification Agreement was executed. [17] Amfac argues that, simply because it was aware of the Group's longstanding demand that the WBH owner obtain sewer easement rights, it does not follow that Amfac contemplated the same requirement at the time the Indemnification Agreement was executed. Amfac contends that mutual assent is required for such contemplation and that mutual assent was lacking when it expressly rejected the Group's demands after the first meeting with Saunders. We disagree. It is well established that a court will construe the plain and unambiguous language of a contract in determining whether particular damages were reasonably within the contemplation of the parties. See Restatement (Second) of Contracts § 351 cmt. a & b (1981); A. Corbin, Corbin on Contracts § 1010 (1964). Moreover, [d]amages ... which might have been prevented if the parties had acted according to the scope of the agreement are direct, and should be awarded. Mortimer v. Otto, 206 N.Y. 89, 99 N.E. 189, 190 (1912) (cited in Kenford Co., Inc. v. County of Erie, 73 N.Y.2d 312, 319, 537 N.E.2d 176, 179, 540 N.Y.S.2d 1, 4 (1989)). Had Amfac secured a sewer easement from the Group, as paragraph 2(a) of the Indemnification Agreement obligated Amfac to do, in 1985, WBIC would not have been faced with the potential inability to close the sale of the WBH to Azabu for failure to produce marketable title resulting from the lack of a recorded sewer easement. WBIC was left with little choice but to secure the sewer easement from the Group by way of the Joinder Agreement. Without the sewer easement, WBIC risked losing a profit of $13,000.000.00 [18] and subjecting itself to a potential lawsuit from Azabu for damages or specific performance. [19] Thus, by discharging its obligation under the Indemnification Agreement, Amfac could have rescued WBIC from having to incur the cost (which included fourteen percent of the Group's past and future rent obligations to Queens, as master lessor, and WDC, as sublessor) of the Joinder Agreement. Because WBIC's counterclaim sought to recover this cost from Amfac as damages for Amfac's breach of its contractual obligation to obtain and file of record a sewer easement in favor of Lot 54, the trial court erred in not ordering Amfac to assume WBIC's obligation to make partial future payments of lease rent under the Joinder Agreement. It therefore follows, and we so hold, that both the portion of the $200,000.00 lump sum payment attributable to past lease rent payments and the future monthly payments of lease rent required by the Joinder Agreement were within the contemplation of the parties at the time the Indemnification Agreement was executed, and WBIC is entitled to recover these amounts from Amfac. However, as we have discussed, lease rent does not include real property taxes; therefore, WBIC's obligation to pay fourteen percent of the Group's future real property taxes, as required by the Joinder Agreement, was not within the contemplation of the parties at the time the Indemnification Agreement was executed. Accordingly, we hold that Amfac is not liable to WBIC for any such future payments. [20]