166 P.3d 961
Haw.2013Background
- Laeroc Waikiki Parkside, LLC purchased the Waikiki Parkside Hotel from K.S.K. (Oahu) Ltd. Partnership under a June 1, 2001 Purchase Agreement that identified only the seller and purchaser.
- Appellees Bloom, Izutsu, and Nakamura are designated as 'Seller's Representatives' (agents) in the Purchase Agreement, not parties to the contract itself.
- The Purchase Agreement contains a five-day access provision and a twenty-day due diligence period; an As-Is clause and a Nonrecourse Provision (8.2) limit recourse to the seller except for fraud, willful misconduct or criminal acts by agents.
- Prior to closing, Aston and Laeroc conducted due diligence; CEI later prepared a property condition report; mold and HVAC issues were alleged by Appellant but disputed by Appellees with respect to prior knowledge.
- Hawaiiana Resorts, Inc. managed the hotel pre- and post-signing; a Hawaiiana Management Agreement provided interim management after closing and related to the sale; Aston later managed under its own agreement.
- The circuit court granted summary judgment for Appellees on all counts; Laeroc appealed challenging multiple orders and the final judgment regarding the Nonrecourse Provision, fiduciary duties, and related third-party claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Appellees were parties to the Purchase Agreement | Laeroc contends Appellees bound to the Agreement as disclosees bound to obligations. | Appellees argue they are Seller's Representatives, not parties, and not liable under the Agreement. | Appellees are not parties to the Agreement. |
| Effect of the Nonrecourse Provision on fiduciary-duty and other claims | Laeroc relies on nonrecourse to bar claims and asserts exceptions for fraud/willful conduct apply. | Appellees contend the Nonrecourse Provision shields them from non-contract claims unless exceptions apply. | Nonrecourse Provision applies; exceptions allow fraud/willful misconduct claims against Appellees. |
| Whether the alleged fraudulent inducement defeats enforcement of the Nonrecourse Provision | Laeroc asserts misrepresentations/non-disclosures induced the Agreement and thus fraud disentitles enforcement. | Appellees argue no genuine issue of material fact on fraudulent inducement; Fujimoto test not satisfied. | Fraudulent inducement not proven; summary judgment upheld against fraud claims. |
| Public policy and exculpatory effect of the Nonrecourse Provision | Laeroc argues public policy forbids waivers of fraud/willful misconduct; provision should be read narrowly. | Appellees argue provision permissible if knowingly and willingly made and not contrary to public policy. | Nonrecourse Provision valid to the extent it does not waive fraud/willful misconduct; public policy supports limitation. |
| Whether Hawaiiana Agreement can trigger the Nonrecourse Provision for fiduciary claims | Laeroc contends Hawaiiana Agreement should not invoke Nonrecourse to bar fiduciary claims. | Appellees argue Hawaiiana Agreement is connected to the Purchase Agreement and thus covered by the Nonrecourse Provision. | Hawaiiana Agreement is connected; Nonrecourse Provision applies to fiduciary claims. |
Key Cases Cited
- Corps Constr., Ltd. v. Hasegawa, 55 Haw. 474 (Haw. 1974) (agency contracts; principal-agent distinctions)
- Pancakes of Hawaii, Inc. v. Pomare Props. Corp., 85 Haw. 300 (Haw. 1997) (agency principles; whether agent becomes party to contract)
- Brown v. KFC Nat'l Mgmt. Co., 82 Haw. 226 (Haw. 1996) (contract interpretation; plain language and intent)
- Fujimoto v. Au, 95 Haw. 116 (Haw. 2001) (fraudulent inducement; exculpatory clauses strict construction)
- Krohnert v. Yacht Sys. Hawaii, Inc., 4 Haw. App. 190 (Haw. App. 1983) (exculpatory clauses; public policy; bargaining power)
- Hoosier Energy Rural Elec. Coop. v. Amoco Tax Leasing IV Corp., 34 F.3d 1310 (7th Cir. 1994) (nonrecourse language broad; based on contract)