Financial Partners, Ltd. v. Kyouei, LLC

NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

No. 29136
:N THE INTERMEDIATE coURT oF APPEALs ’“

OF THE STATE OF HAWAfI

Plaintiff/Countercla;

FINANCIAL PARTNERS, LTD.,
Defendant-Appellee,

v.
KYOUEI, LLC, Defendant/Counterclaimant-Appella

APPEAL FROM THE DISTRICT COURT OF THE FIRST CIRCUIT

HONOLULU DIVISION
(CIVIL CASE NO. lRCO7-l-2270)

MEMORANDUM OPINION _
Nakamura, C.J., Foley and Leonard, JJ.)

(By:

appeals from the Judgment filed on April 3,

(Kyouei)
Honolulu Division1

District Court of the First Circuit,
The district court entered judgment in favor of

=1’. H§’ ./.ZH»:F%"E?§UZ

9*?

Defendant/Counterclaimant-Appellant Kyouei, LLC
2008 in the

(district

court).
Plaintiff/Counterclaim Defendant-Appellee Financial Partners,
2008 "Order

and against Kyouei pursuant to the April 3,

(FP)
Motion for Summary Judgment on [Kyouei's]

Ltd.
[FP‘s]

Fund" (Order Granting SJ Motion).
On appeal,
decision ignored "numerous genuine and triable issues" of

Granting
Counterclaim and for Release of Moneys Deposited into Rent Trust

Kyouei argues that the district court's

ignored FP's material breach of the contract; and "failed
plain,

fact;
to interpret the terms of the contract according to their

ordinary, and accepted sense in common speech."
I. BAcKGR00ND

l994,

On or about March 2l,
Ltd.

(the Lease) with Tosei Shoji,
(Premises). The

Lease

FP entered into a Master
for premises located at

Lease

1429 Makaloa Street in Honolulu, HawaiU_
The Lease required consenti

was extended until November 2007.

subsequently

from the landlord of the Lease for assignment and sublease.

the landlord of the Lease,

Tosei Shoji, Ltd.,

McKenzie presided.

1 The Honorable Christopher P.

UB"ZE..;..+§

NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

assigned its interest in the Lease to AleXander & Baldwin, Inc.
(Landlord).

FP operated a cocktail lounge, Club Tsunami, on the
Premises and owned a liquor license issued by the Honolulu Liquor
Commission (HLC). On January lO, 2006, FP entered into a
Services Agreement with Kyouei, whereby Kyouei, as manager, would
operate Club Tsunami for FP, beginning on April l, 2006. On
September 2l, 2006, FP and Kyouei entered into a superceding
Sublease and License Agreement (Sublease), which was effective as
of June l, 2006, The Sublease permitted Kyouei to operate a
cocktail lounge known as Gion on the Premises with an option to
purchase FP's assets, including FP's rights under the liquor
license. The Sublease authorized Kyouei to use FP's liquor

license for a license fee:

a. License Fee. Kyouei shall pay [FP] a license fee
of FIF'I‘Y FIVE THOUSAND DOLLARS ($55,000.00). [FP]
acknowledges a payment of $l0,000.00 from Kyouei. The
balance of $45,000.00 shall be paid to [FP] upon the
execution of this Agreement, the consent of the landlord of
the sublease [sic]. If the [HLC] does not allow the license
agreement and does not allow Kyouei to use [FP's] liquor
license and Kyouei is not at fault, then Kyouei shall be
entitled to the return of the FORTY~FIVE THOUSAND DOLLARS
($45,000.00). The initial $l0,000.00 payment from Kyouei to
[FP] is a non-refundable fee.

The Sublease was to expire on November 30, 2007. In

January 2007, FP demanded the remaining $45,000.00 license fee

from Kyouei, even though FP had failed to obtain the Landlord's
consent to the Sublease and HLC's approval for Kyouei’s use of
FP's liquor license. Kyouei refused to pay the fee on the ground
that the Landlord had not consented to the Sublease. On

April l6, 2007, FP filed a complaint against Kyouei. On May l,
2007, Kyouei filed a counterclaim against FP, alleging breach of
contract, bad faith, detrimental reliance, and specific
performance.

FP and Kyouei agreed to deposit the $45,000.00 license
fee into a rent trust fund. FP proposed that the license fee be
released if Kyouei "has the benefit of the full term of the
Sublease." Kyouei objected to this language. On March 7, 2008,
FP moved for summary judgment on Kyouei's counterclaim and for

release of the rent trust funds. On March l2, 2008, Kyouei filed

NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

its opposition to FP's motion. On March l7, 2008 the district
court orally ruled that "there are no genuine issues of material
fact and that [FP] is entitled to a judgment as a matter of law,
finding that [Kyouei] received the benefit of the bargain[, and]
[FP] did everything that fit was] supposed to and

[is] entitled to the forty-five thousand dollars. So I'm
granting both motions."

On April 3, 2008, the district court entered the Order
Granting SJ Motion and the Judgment. Kyouei timely appealed.

II. ST?U§D1URD <JF IUYVIEWV

[An appellate] court reviews a trial court's grant of

summary judgment de novo. Oahu Transit Servs., Inc. v.
Northf1eld Ins. Co., 107 HawaiH.2;1, 234, 112 P.3d 717, 720
(2005). The standard for granting a motion for summary

judgment is well settled:

Summary judgment is appropriate if the pleadings,
depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to
judgment as a matter of law. A fact is material if
proof of that fact would have the effect of
establishing or refuting one of the essential elements
of a cause of action or defense asserted by the
parties. The evidence must be viewed in the light
most favorable to the non-moving party. In other
words, [the appellate court] must view all of the
evidence and the inferences drawn therefrom in the
light most favorable to the party opposing the motion.

Price v. AIG HawaiU Ins. Co., 107 Hawafi l06, ll0, lll P.3d
l, 5 (2005) (original brackets and citation omitted).

Kamaka v. Goodsill Anderson Quinn & Stifel, ll7 HawaiH.92, l04,
l76 P.3d 9l, 103 (2008).
III. DISCUSSION

A. THE INTENT OF THE PARTIES IN HOLDING MONEY IN THE
RENT TRUST FUND DOES NOT RAISE A MATERIAL ISSUE OF
FACT.

Kyouei contends that an unsettled material issue of
fact exists regarding the parties' intent in holding the
remaining $45,000 license fee in the rent trust fund. Kyouei
argues that it intended for the trust funds to be dispersed to FP
upon satisfaction of conditions in the Sublease governing the

payment of the license fee. Kyouei further argues that FP, by

`contrast, intended for the funds to be dispersed to itself upon

NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

expiration of the Sublease. Regardless of this difference, we
find no material issue of fact.

We note that both parties agreed to stipulate to the
establishment of a rent trust fund. We agree with Kyouei's
characterization of the release of the rent trust fund as "merely
a remedy" in response to FP‘s motion for summary judgment.
Because we deem the rent trust fund to be collateral, we see no
materiality in the parties' alleged difference of intent in
holding money in the rent trust fund. §§§ Kamaka, ll7 HawaFi at
l04, l76 P.3d at 103 ("A fact is material if proof of that fact
would have the effect of establishing or refuting one of the
essential elements of a cause of action or defense asserted by

the parties.").

B. DISAGREEMENT ON INTERPRETATION OF SUBLEASE AND
LICENSE AGREEMNT DOES NOT RAISE A MATERIAL ISSUE
OF FACT.

Kyouei contends its disagreement with FP over the
interpretation and intent of the Sublease raises a material issue

of fact. We disagree. Kyouei summarily states:

[FP] interprets the language of the Controlling
Provision to mean that the $45,000.00 was part of a
$55,000.00 license fee paid from [Kyouei] to [FP] for
[Kyouei] to use the liquor license held by [FP]. Kyouei
contends that the $45,000.00 was payment for [FP's]
fulfillment of specific terms that would allow for smooth
and efficient operation of business, and allow principal
employees to comply with federally mandated immigration
laws.

(Record references omitted.) The Sublease made no express
provisions for the "smooth and efficient operation of [Kyouei’s]
business" or compliance with immigration laws. The Sublease
expressly excludes all other collateral agreements through a
merger clause. Kyouei cites to no authority broadly holding that
disagreement over the interpretation of a contract raises a

material issue of fact.

C. THE "BENEFIT OF THE BARGAIN" RAISES A MATERIAL
ISSUE OF FACT.

Kyouei contends it did not receive its bargained for

contractual benefit and FP's alleged breach caused Kyouei to

NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

suffer damages. Because FP disputes these allegations, Kyouei
contends there are material issues of fact.

Kyouei specifically argues that its bargained for
benefits included (l) HLC approval of its use of FP's liquor
license and (2) the Landlord's consent to the Sublease.

Paragraph 3.a. of the Sublease provides:

a. License Fee. Kyouei shall pay [FP] a license fee
of FIFTY F'IVE THOUSAND DOLLARS ($55,000.00) . [FP]
acknowledges a payment of $l0,000.00 from Kyouei. The
balance of $45,000.00 shall be paid to [FP] upon the
execution of this Agreement, the consent of the landlord of
the sublease [sic],

Kyouei further highlights Sublease provision l.02(i), which makes
the Sublease subject to "the ability to use of [sic] the liquor
license under the license agreement herein" and grants Kyouei the
power to terminate the Sublease "if it cannot use the liquor
license." Kyouei argues that this power of termination
presupposes a requirement for HLC approval.

Kyouei maintains that because FP did not secure the
Landlord‘s consent to the Sublease, Kyouei was not able to obtain
parking for its customers from Pacific Guardian Center. Kyouei
further argues that because HLC did not recognize its license
agreement, it could not acquire premise liability insurance.
Kyouei supports these allegations through Miyuki Ito's

Declaration, which states in relevant part:

27, Because [FP] did not obtain the Landlord‘s
consent, Kyouei could not obtain parking spaces for its
customer[s] from Pacific Guardian Center, like its
neighboring tenant, Kai did. This caused problems in
bringing customers to Gion, and put it at a competitive
disadvantage.

28. Furthermore, because Kyouei's license agreement
was not recognized, when it attempted to procure premise
liability insurance on its own, it was rejected, and the
lack of premises liability exposed Kyouei to potentially
devastating liability.

FP attempts to discredit this evidence by arguing that it amounts
to inadmissible hearsay and therefore cannot serve as a basis for
denying summary judgment. Miyuki Ito is a member of Kyouei,
Inc., which operates Gion. She states in her declaration that "I
make this Declaration based on personal knowledge and am

competent to testify to the matters discussed herein." Ito's

NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

statements about the harm to Kyouei's business are based on
personal knowledge and are therefore admissible. First Hawaiian
Bank V. WeekS, 70 HaW. 392, 396 n.2, 772 P.2d ll87, ll9O n.2
(l989) (noting that "HRCP 56(e) provides in part that
[s]upporting and opposing affidavits shall be made on personal
knowledge, shall set forth such facts as would be admissible in
evidence, and shall show affirmatively that the affiant is
competent to testify to the matters stated therein.").

Because Kyouei has raised a material issue on an
essential element of a claim, the district court erred when it
granted FP‘s motion for summary judgment on that claim. §§§
Kamaka, ll7 Hawafi at l04, l76 P.3d at l03 ("A fact is material
if proof of that fact would have the effect of establishing or
refuting one of the essential elements of a cause of action or
defense asserted by the parties.")

`Iv. coNcLUs:coN

The Judgment filed on April 3, 2008 in the District
Court of the First Circuit, Honolulu Division, is vacated, and
this case is remanded for proceedings consistent with this
opinion.

DATED= H@n@lulu, Hawai‘i, Apri1 27, 2010.

on the briefs:

Junsuke Otsuka _
David Squeri é[ a in _
(Otsuka & Buffington) '

for Defendant/Counterclaimant- Chief Judge

Appellant.

Keith M. Kiuchi

(Kiuchi & Nakamoto)

for Plaintiff/Counterclaim
Defendant-Appellee.

`

Associate Judge

a

Associate Judge