Opinion ID: 578000
Heading Depth: 3
Heading Rank: 3

Heading: Hawaii Broker's License Requirements

Text: 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.