Opinion ID: 2516625
Heading Depth: 1
Heading Rank: 9

Heading: Decision to exclude evidence relevant to unjust enrichment

Text: Tatibouet argues the circuit court erred when it confirmed the arbitration award because the panel refused to hear evidence that was pertinent and material to the dispute. He contends that HRS § 658-9(3) authorizes this court to vacate the award because the arbitrators refused to hear evidence of how Ellsworth was unjustly enriched by the $2.85 million award. Tatibouet's argument is without merit. The panel properly considered the issues, and it correctly excluded irrelevant evidence of operating and improvement expenses. HRS § 658-9(3) authorizes this court to vacate an award if the arbitrators were guilty of misconduct in . . . refusing to hear evidence, pertinent and material to the controversy[.] See supra note 4. This court has held that arbitration awards must therefore be vacated where they fail to decide the question that has been submitted to them. Mathewson, 82 Hawai`i at 77, 919 P.2d at 989. In Mathewson, this court held that evidence is material and pertinent when it has a tendency to make the existence of any fact that [was] of consequence to the determination of the action more probable or less probable than it would be without the evidence[.] Id. at 78, 919 P.2d at 990 (quoting Hawai`i Rules of Evidence Rule 401) (some alterations in original and internal quotation marks omitted). In the present case, Tatibouet's proffer of evidence of a $2.85 million windfall in favor of Ellsworth was based on two separate premises. First, Tatibouet wanted the panel to award him the difference between Ellsworth's purchase price of the Pickwick Hotel, $7.95 million, and the value of the hotel at the time of the closing on July 1, 1998, which was $10.8 million. Second, Tatibouet wanted to adduce evidence of the amount of the money he spent on improvements, taxes, mortgages, and insurance on the Mark Twain Hotel between October 1, 1995 and July 1, 1998. Therefore, the issue at hand is whether evidence of the Pickwick's appreciation in value and the operating and improvement and certain operating costs for the Mark Twain Hotel was pertinent and material to the controversy that was the subject of the arbitration. The arbitration panel received evidence on the issue of the appreciation in value, and it properly determined that Ellsworth was not unjustly enriched by $2.85 million for the Pickwick Hotel. The panel noted that if Tatibouet had not breached the Settlement Agreement and had sold the Pickwick Hotel to Ellsworth in 1996, Ellsworth would have been the beneficiary of the 1998 rise in San Francisco hotel values, so would have today been the owner of a Hotel with a value of approximately $10.8 million. Therefore, the panel properly rejected Tatibouet's contention that Ellsworth was unjustly enriched based on pertinent and material evidence presented to it. The arbitration panel refused to receive evidence regarding the operating expenses for and cost of improvements on the Mark Twain Hotel because the Settlement Agreement did not provide for the compensation of such expenses. Unlike the Pickwick Hotel, which was sold to a third party prior to the delivery of the required appraisals in violation of the Settlement Agreement, the Mark Twain Hotel was sold to Ellsworth as contemplated by the Settlement Agreement. Therefore, the panel did not order consummation of the transaction and did not control the terms under which the transaction occurred. It found that: The Settlement Agreement was effective as of June 1, 1993. Thus, the parties anticipated that Ellsworth might acquire the Mark Twain after it had been operated by Respondents for more than three years. Yet the Settlement Agreement made no provision for reimbursement for expenses incurred by Tatibouet during that interim period. On the other hand, Tatibouet was entitled to retain profits realized from the operation of the Hotel during the period prior to the sale. (Footnote omitted.) Consequently, the panel did not find any basis for reimbursing Tatibouet for such expenses during the period in which he caused a delay. Because the parties participated in the sale of the Mark Twain Hotel pursuant to the terms of the Settlement Agreement and the operating expenses were not contemplated by the contract, evidence of the requested expenses was not relevant to the sale and transfer of the Mark Twain Hotel, which was effected by the parties and was not ordered by the panel. Therefore, evidence regarding the operating and improvement expenses was neither material nor pertinent to the controversy. Accordingly, the circuit court did not err.