18 plead fraud with particularity, in violation of GRCP 9(b) and applicable case law. They also
19 argue that this first cause of action should be dismissed because, under the terms of the JVA, the 20 Wilsons did not owe any duty to OHI-Lee to disclose the existence of the previous Lease; and, 21 fmally, the Lease complained of was cancelled and terminated nunc pro tunc to August 2, 1994 22 pursuant to a Judgment by Default issued by the Honorable Judge Michael J. Bordallo on 23
24 11 25 The Cross-Claim incorporates by reference OHI's and Lee's April 14, 2008 Memorandum of Points and Authorities in Support of Motion to Vacate Judgment and the various documents attached to the Memorandum. See 26 OHI-Lee Cross-Claim at 120 (May 19, 2009). The Court considered those documents in rendering this decision as allowed under GRCP 10. With respect to the incorporation by reference of "all antecedent pleadings in this case, 27 including motions, oppositions thereto," on the parties' request, the Court also considered the Decision and Order on Defendants Wilsons' Motion for Summary Judgement, Plaintiff's Counter Motion For Summary Judgement Against 28 the Wilsons, Plaintiff's Motion For Summary Judgement Against Defendant Korando and Defendant Korando's Motion to Amend issued on March 6, 2006. OHI withdrew its Fifth Cause of Action for Abuse of Process; therefore, the Court does not consider it here. See Opp'n. Mot. to Dismiss at 1144-45 (May 9, 2010).
-5- January 25, 2001 in Donald E. and Teresita S. Wilson and Joann S. Nauta aka Joann Nauta 2 Sahagon vs. Da Yu Overseas, Inc., CV0891-00 (Super. Ct. Guam, Jan. 25, 2001) and therefore, 3 the Wilsons had no obligation to disclose a previously failed lease. Motion at 7-8 and Exhibit B 4 (Mar. 9, 2012). 5
6 OHI-Lee do not address the Wilsons' argument that the fraud claim fails to state with
7 particularity the circumstances constituting fraud. Instead, OHI-Lee counter that the Wilsons 8 owed them a fiduciary duty under the law of partnership; therefore, even though OHI may have 9 failed to conduct its own due diligence prior to entering into the JVA, once the parties entered 10
11 into that agreement, the obligation changed and "WILSONS owed OHI an absolute duty of
12 disclosure of the existence of the lease and its terms, and if it had been cancelled or terminated 13 by May 1995, any documentation to support such termination." Opp'n. Mot. Dismiss at 6 (Mar. 14 9, 2010) (emphasis added). 15 2. Second Cause of Action: Breach of Fiduciary Duty 16
17 Consistent with the allegations set forth in its First Cause of Action, OHI and Lee
18 continue to advance a claim that the Wilsons owed OHI and Lee a fiduciary duty "of utmost 19 honesty, full disclosure, and direct and fair doing," attributed to the parties' JVA. OHI-Lee 20 Cross-Claim at '123 (May 19, 2009). They further allege that this fiduciary duty was breached 21 when the Wilsons "deliberately failed to inform OHI and Lee that the property in question had 22
23 been grossly overvalued by WILSON" and of the existence of the Lease Agreement. /d. OHI-
24 Lee also assert that the Wilsons, because of this purported fiduciary duty, should have assisted 25 Lee, who they knew was not "a native speaker of English and was completely unfamiliar with 26 Guam law and regulation regarding the nature of a joint venture and obligations of co-venturers 27
28 thereunder" to resolve disputes with the venture's creditors, and that the Wilsons' failure to
-6- cooperate with these creditors in settlement of the claims against OHI and Lee also breached 2 their fiduciary duties. /d. at 123. 3 The Wilsons seek to dismiss this cause of action, arguing that although there is an 4 "implied covenant of good faith and fair dealing" in every contract, this implied covenant "does 5
6 not require the WILSONS to disclose possible defects in the title or any prior failed transactions
7 [such as the Lease Agreement]. WILSONS made no agreement to warrant a defect free title to 8 the property." Motion at 8 (Mar. 9, 2012). The Wilsons also acknowledge that, although they 9 did enter into the Lease Agreement on September 21, 1990, the Lease Agreement was cancelled 10
ll and terminated by a Judgment made nunc pro tunc to August 2, 1994- which pre-dates the
12 JVA. The Wilsons argue additionally that the Second Cause of Action is barred by the statute of 13 limitations requiring any action concerning a written contract to be filed within four (4) years 14 andthat OHI-Lee are barred from bringing any action relating to the JVA pursuant to the OHI- 15 Wilson Release which the parties entered into on February 5, 2001 and later amended on 16
17 November 30, 2001. The Wilsons argue that the Release "prevents OHI and LEE from bringing
18 allegations against WILSON dating from the original contract terms [in the JVA] by the statute 19 of limitations as well as the doctrines of laches and collateral estoppel." /d. at 9. Finally, the 20 Wilsons argue that any action to invalidate the OHI-Wilson Release had to have commenced no 21 later than November 30,2005. 22
23 3. Third Cause of Action: Breach of Contract 24 OHI and Lee's third cause of action against the Wilsons is for breach of the JVA and the 25 OHI-Wilson Release. OHI and Lee argue that the breach of the JVA occurred due to: (1) The 26 Wilsons' failure of adequate consideration for the JVA "by failing to provide sufficient 27
28 documentation to support the valuation of the real property and by arbitrarily assigning a
-7- property value of $1,000,000" and, further, that the grant of a license to OHI-Lee to enter onto 2 the premises was not sufficient consideration because such license was subject to the Lease 3 Agreement. OHI-Lee Cross-Claim at 124(A-B) (May 19, 2009). The Wilsons are also alleged 4
5 to have breached the Release Agreement by failing: ( 1) to participate in settlement negotiations
6 with the joint venture's creditors and by refusing to quitclaim or transfer rights to individual 7 properties which could have been used to satisfy creditors' claims; and (2) "to notify OHI and 8 Lee of the true state of this litigated matter and to seek OHI and Lee's cooperation in the 9 litigation and by conducting frivolous litigation regarding the transfer of certificates of title to 10
ll plaintiff Hawaiian Rock [which was a further breach of the Wilsons'] contractual duty of
12 cooperation, good faith and fair dealing as to OHI and Lee." /d. at 124(C-D). OHI and Lee seek 13 $3,000,000 in damages for this alleged breach of contract by the Wilsons. 14 4. Fourth Cause of Action: Mental Distress 15 Lee alleges that the Wilsons have harassed and threatened him at various times between 16
17 "1999 and the present day" and that the Wilsons verbally abused Lee when he "sought to
18 investigate storage of Wilson's personal property on one of the portions of the joint venture 19 property which had been allocated to OHI and Lee." /d. at 127. Claims also include other 20 behavior on behalf of the Wilsons which have caused great distress and anguish to Lee ... in the 21
22 amount of $1,000,000.00 ..... " /d. at T.(27-28. The Wilsons contend that the claim should be
23 dismissed because it is time-barred pursuant to 7 GCA §§ 11307. Motion at 10-11 (Mar. 9, 24 2009). 25 c. Provisions of the OlD-Wilson Release. 26 The Joint Venture was effectively terminated and the partnership between the Wilsons 27
28 and OHI ended as of February 5, 2001. OHI-Wilson Release at 2, 1 1 (Feb. 5, 2001). The
-8- provisions of the OHI-Wilson Release with regard to the limits of the universe of the parties' 2 release of claims against each other state as follows: 3 5. Indemnification by Om and Release. OHI fully and forever releases and 4 discharges the Wilsons, their successors, heirs, assignees, parents, subsidiaries, affiliates, directors, officers, managers, employees, attorneys, partners, investors, 5 shareholders, beneficiaries, guarantors, indemnitors, insurers, agents servants, 6 affiliated or independent contractors, and affiliated partnerships, persons and entities in their capacities as such from any and all claims, causes of action, 7 demands and charges of whatever nature, known or unknown, arising out of or 8 that could have been asserted in connection with the Joint Venture Agreement regardless of the legal theory or purported basis of legal duty or liability on which 9 any such claim may be asserted. OHI shall at all times defend and hold the Wilsons harmless from any and all claims, lawsuits or other legal proceedings, lO whether threatened or commenced and whether legal or equitable in nature, 11 arising out of or by reason of the Wilsons having been a party to the Joint Venture Agreement or asserted against the Joint Venture and/or the Wilsons in connection 12 with OHI' s construction of the Improvements, all such threatened or actual claims, lawsuits or other legal proceedings are hereinafter referred to as "Claims." 13 In addition, OHI shall indemnify and hold the Wilsons harmless for any 14 judgments, cost, loss, damage, or expense, including reasonable attorneys fees, arising from any Claims. All such judgments, costs, losses, damages, and 15 expenses are hereinafter referred to as "Costs and Expenses." 16 OHI-Wilson Release at 4-5, <][5 (Feb. 5, 2001). 17 6. Indemnification by Wilsons. The Wilsons shall indemnify and hold OHI, 18 its officers, directors, shareholdrs, employees, agents and representatives, harmless from and against any and all claims, demands, actions, damages, 19 liabilities, costs and expenses (including, attorneys fees) asserted against OHI 20 arising out of or in connection with any actions undertaken by the Wilsons with respect to the Wilson Property unless the same is caused by the acts or omissions 21 of OHI and its agents. 22 /d. at 6, <][6. 23 The OHI-Wilson Release also contains certain representations and warranties which are 24
25 pertinent to the instant Motion, including the following:
26 9.2. Each party has received independent legal advice from their attorneys with respect to the advisability of making the settlement provided for in 27 this Agreement and with respect to the advisability of executing this Agreement. 28
-9- 9.4. Each party to this Agreement has made such investigation into the facts pertaining to this settlement and this Agreement as it deems 2 necessary.... 3 9.6. Each term of this Agreement is contractual and not merely 4 a recital. 5 9. 7. Each party to this Agreement is aware that it may hereafter 6 discover claims or facts in addition to or different from those it now knows or believes to be true with respect to the matters related herein. Nevertheless, it is 7 the intention of the parties to fully, fmally and forever settle and release all such 8 matters, and all claims relative thereto, which do not exist, or may exist, or heretofore have existed between them. In furtherance of such intention, the 9 releases given herein shall be and remain in effect as full and complete releases of all such matter, notwithstanding the discovery or existence of any additional or 10 different claims or facts relative thereto. The parties expressly waive the benefits 11 of Title 18 Guam Code Annotated § 82602, formerly Civil Code of Guam § 1542, and the provisions of any similar statute, rule, ordinance or legislation from any 12 other applicable jurisdiction. Notwithstanding anything to the contrary in this subparagraph, the provisions of this subparagraph shall not apply to facts (or 13 claims which may be based thereon) which are intentionally or fraudulently 14 withheld by a party from the other.
15 9.8 The parties understand and acknowledge that the releases hereunder are intended to cover all claims for damages that exist as of the date of 16 this Agreement but which the parties may not now know exist, and which, if 17 known, could material! y affect the parties' decision to execute this Agreement, regardless of whether the lack of knowledge is due to oversight, mistake, 18 ignorance, negligence or any other cause, other than fraudulent conduct by any party to this Agreement. 19
20 /d. at fl9- 9.8.
21 DISCUSSION 22 I. CONVERSION OF WILSONS' RULE 12(B)(6) MOTION INTO A RULE 56 MOTION. 23 The Wilsons' Motion to Dismiss pursuant to Rule 12(b)(6), or in the alternative, for 24
25 summary judgment motion, will be treated as one for summary judgment because the court has
26 been presented with and has considered "matters outside of the pleadings" in rendering this 27 written Decision and Order. Core Tech Intern. Corp. v. Hanil Engineering & Const. Co., Ltd., 28 2010 Guam 13129 (citing Newby v. Government of Guam, 2010 Guam 4114 (quoting Guam R.
-10- Civ. P. 12{b) and citing Carter v. Stanton, 405 U.S. 669, 671 (1972), numerous citations 2 omitted)("The general rule is that a Rule 12{b)(6) motion to dismiss for failure to state a claim 3 upon which relief can be granted, must be converted into a Rule 56 motion for summary 4 judgment whenever 'matters outside the pleadings' are presented to and considered by the Court. 5
6 ..."). In this instance, the parties presented several extrinsic documents which the Court
7 considered in ruling on the instant motion, including, but not limited to: the JV A; the Lease 8 Agreement; the several Decisions issued by Presiding Judge Lamorena in this case; the HRC 9 Settlement Agreement; the Complaint in Teresita S. Wilson, Donald Eugene Wilson, et al. v. Da 10
11 Yu Overseas, Inc., CV0594-94 (Super. Ct. Guam, April 14, 1994); the Affidavit of Jin Hee Lee
12 in Opposition to Motion To Dismiss; Letter from W. Nicholas Captain, MAl, CRE, President of 13 Captain, Hutapea & Associates dated February 11, 2011; the OHI-Wilson Release; and copies of 14 OHI's contractor's licenses for the period of 1995 through 2000. 12 The pleadings relating to the 15 motion to dismiss also incorporate by reference factual assertions and legal arguments contained 16
17 within earlier filings on the record in this case dating anywhere from 2003 to 2009 and later, all
18 of which the Court had to review in order to adequately address all of the issues raised by the 19 parties in the instant motion. Consequently, conversion is required under the circumstances. 20
22 12 23 The Court would not have been required to convert the Wilsons' Motion to Dismiss into a summary judgment motion if the only extrinsic evidence presented to and considered by it were limited to documents which were 24 "integral" to the plaintiff's complaint and "dispositive" in the dispute. The Guam Supreme Court noted an exception to the rule of conversion is where the document is one "whose authenticity cannot be questioned and on 25 which plaintiff's complaint "necessarily relies." See Newby v. Government of Guam, 10 Guam 4 '115. Both theN A and the om-Wilson Release fall within this exception as the parties both rely upon the agreements in support of 26 their respective claims. Indeed, the authenticity and the validity of the om-Wilson Release have already been adjudicated pursuant to the Decision and Order issued by Presiding Judge Alberto C. Lamorena m on March 6, 27 2006. In that Decision and Order, the Court took judicial notice "that the agreement between the Wilsons and om referenced in the [HRC] Settlement Agreement is the [Om-Wilson] Release Agreement" and found also that the 28 Release Agreement was incorporated into the HRC Settlement Agreement. Dec. & Order at 6-7 (March 6, 2006). The Contractor's Licenses would also qualify as self-authenticating documents pursuant to Guam R. of Evid. Rule 902.
-11- A. Rule 56 Summary Judgment. 2 Summary judgment is appropriate if "the pleadings, depositions, answers to 3 interrogatories, and admissions on ftle, together with the affidavits, if any, show that there is no 4 genuine issue as to any material fact and that the moving party is entitled to a judgment as a 5
6 matter of law." Bank of Guam v. Flores, 2004 Guam 25 1 8 (quoting Manvil Corp. v. E. C.
7 Gozum & Co., 1998 Guam 20 1 6). ''There is a genuine issue of material fact, if there is 8 'sufficient evidence' which establishes a factual dispute requiring resolution by a fact-fmder." 9 Guam Pacific Enterprise, Inc. v. Guam Poresia Corp., 2007 Guam 22 1 8 (quoting Iizuka Corp. 10
11 v. Kawasho Int'l (Guam), Inc., 1997 Guam 10 17). The dispute must involve a material fact,
12 "which is a fact that is relevant to an element of a claim or defense and whose existence might l3 affect the outcome of the suit." Id. (quoting T. W. Elec. Serv., Inc. v. Pacific Elec. Contractors 14 Ass'n, 809 F.2d 626,630 (9th Cir. 1987)). 15 When ruling on a motion for summary judgment, the Court must view the facts in the 16
17 light most favorable to the non-moving party, giving that party the benefit of all reasonable
18 inferences that can be drawn from those facts. See Flores, 2004 Guam 25 128. The Court must 19 also resolve any factual inconsistencies in favor of the non-moving party. Id. at 127. 20 As the non-moving party, OHI's and Lee's burden to defeat the motion "was to set forth 21 specific facts showing that there is a genuine issue for trial." Guam R. Civ. P. 56(e). "[T]he 22
23 plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for
24 discovery and upon motion, against a party who fails to make a showing sufficient to establish 25 the existence of an element essential to that party's case, and on which that party will bear the 26 burden of proof at trial." Celotex Corp. v. Catrett, 411 U.S. 317,322 (1986). OHI and Lee may 27
28 not rely on unsupported or conclusory allegations of his pleading, but must present some
-12- "significant probative evidence tending to support the complaint." See Anderson v. Liberty 2 Lobby, Inc., 477 U.S. 242. 249 (1990) (quoting First National Bank of Arizona v. Cities Service 3 Co., 391 U.S. 253, 288-89 (1968). 4 II. THE Om-WILSON RELEASE BARS RECOVERY OF Om CROSS-CLAIMS ONE THROUGH 5 THREE. 6 A. om and the Wilsons owed each other a fiduciary duty by virtue of the JVA. 1 The OHI-Lee Opposition to the Wilsons' Motion to Dismiss is based largely on the 8
9 contention that the Wilsons breached their fiduciary duty to the partners of the Joint Venture by
10 failing to provide all relevant information about the property to the partnership - specifically, II that there was a Lease Agreement on the real property which was the Wilsons' contribution to 12 and consideration for the Joint Venture - and that the Wilsons' failure to provide this 13
14 information to OHI resulted in the demise of the joint venture and damages to OHI.
15 The law with regard to the duties of members of a joint venture to each other is clear - 16 each owes the other the utmost good faith, fairness and honesty in their dealings. Ghiz v. 17 Millett, 222 P.2d 982, 985 (Ariz. 1950), aff'd 224 P.2d 650 (1950)("The relationship between 18 joint adventurers, like that existing between partners, is fiduciary in character and imposes on all 19
20 participants the obligation of loyalty to the joint concern, and of the utmost good faith, fairness
21 and honesty in their dealings with the other with respect to matters pertaining to the enterprise. 22 This is especially true of those to whom the conduct of the transaction, or the property thereon is 23 entrusted ... [P]arties who enter into a joint adventure engage in a common enterprise for their 24 mutual benefit, and have a right to demand and expect from their associates good faith in all that 25
26 relates to their common interests.") The fiduciary nature of a joint venture relationship also
27 requires the complete disclosure of everything affecting the relationship. See, e.g., Goben v. 28 Barry, 616 P.2d 90, 97 (Kan. 1984); Carroll v. Caldwell, 12 lll.2d 487, 197 N.E.2d 69 (1958);
-13- Martin v. Hunter, 179 Kan. 578, 297 P.2d 153 (1956). The relationship requires that each refrain 2 "from taking any advantage of one another by the slightest misrepresentation, concealment, 3 threat or adverse pressure of any kind." See DeSantis v. Dixon, 72 Ariz. 345, 350, 236 P.2d 38, 4 41 ( 1951). These duties and obligations continue until the joint venture is fmally terminated. 5
6 Mannis v. Solot Co., 573 P.2d 899, 903 (Ariz. Ct. App. 1977). Notwithstanding the parties'
7 general obligations to each other as fiduciaries as a result of their JVA, however, OHI's claims 8 stemming from the JV A are barred by the OHI-Wilson Release. 9 B. The Release Agreement bars OID's recovery as a matter oflaw. 10
11 As set forth in greater detail, supra, the parties entered into the OHI-Wilson Release on
12 February 5, 2001, in order "to settle and determine their respective rights and claims pursuant to 13 the Joint Venture Agreement concerning the Wilson Property and the Homes and improvements 14 . 15 on the Wilson Property and have agreed to settle and determine their respective rights and claims
in the manner hereinafter stated." OHI-Wilson Release at 1-2, Recitals (Feb. 5, 2001). The 16
17 Release also clearly defined the parties' obligations with regard to the payment of mechanic's
18 and additional liens as well as to each other. It is critical that the parties' Release included a 19 specific waiver of the benefits and protections of 18 G.C.A. § 82602, which provides that, "A 20 general release does not extend to claims which the creditor does not know or suspect to exist in 21 his favor at the time of executing the release, which if known by him must have material! y 22
23 affected his settlement with the debtor." See OHI-Wilson Release at 1 9.7 ("The parties
24 expressly waive the benefits of Title 18 Guam Code Annotated § 82602, formerly Civil Code of 25 Guam§ 1542, and the provisions of any similar statute, rule, ordinance or legislation from any 26 other applicable jurisdiction.... "). 27
-14- OHI claims that it is entitled to rescind the JVA "and any ancillary contracts" (which 2 presumably includes the OHI-Wilson Release) due to the Wilsons' alleged fraud and 3 misrepresentation about the existence of the 99-year lease agreement and the "true value" of the 4
5 property as set forth in the valuation conducted by Captain Hutapea & Associates in 2011. See
6 Opp'n. Mot. Dismiss at 9, 'ft 28-32; Exhibit E to OHI's Exhibits In Support of Opp'n. Mot.
7 Dismiss (May 9, 2010). However, at the time the Release Agreement was executed by OHI and 8 the Wilsons on February 2, 2001, OHI and Lee had actual knowledge of the 99-year Lease 9 Agreement and its impact on the joint venture and had such knowledge since 1999 - two years 10
II prior to the execution of the Release with the Wilsons. In his Affidavit in Opposition to the
12 Motion to Dismiss, Lee attests as follows: 13 I did not learn of the 99-year lease on the subject property unti/1999, five years 14 after the venture was formed and approximately $3M expended on construction of residences on the property. If I had known of this lease, I would never had 15 entered a joint venture or other arrangement with the Wilsons without the express consent of the lessees of the property, or appropriate documentation showing that 16 their lease had been terminated. 17 Lee Affidavit at 3, 16 (May 9, 2002)(emphasis added)(See also 5, 114). Despite having actual 18 knowledge of what OHI claims is to have been fraud in the inducement of the JVA, a material 19
20 misrepresentation and a breach of the Wilsons' fiduciary duty to OHI, Lee, on behalf of OHI,
21 executed the Release Agreement which extended to the entire universe of possible claims which 22 it had or may have had against the Wilsons. 23 OHI' s Recission claim also infers that the Release does not extend to the fraud alleged to 24
25 have been responsible for OHI entering to joint venture, i.e., the Wilsons' concealment of the 99-
26 year lease and the misrepresentation regarding the value of the property, and, indeed the last 27 sentence of Paragraph 9. 7 of the Release may seem to provide a basis for this argument: 28
-15- Notwithstanding anything to the contrary in this subparagraph, the provisions of this subparagraph shall not apply to facts (or claims which may be based thereon) 2 which are intentionally or fraudulently withheld by a party from the other. 3
4 OHI-Wilson Release at 1 9.7 (Feb. 5, 2001). However, the Lease Agreement and the low 5 valuation are the same facts upon which OHI' s First, Second and Third Causes of Action are 6 based and these facts were known to, or should have been known to, OHI at the time of the 2001 7
8 Release.
9 Under appropriate circumstances, such as here, a fraudulent inducement claim may be 10 subject to release. See, e.g., Nycal Corp v. Inoco PLC, 166 F.3d 1201, 1202 (2d Cir. 1998); Finz 11 v. Schlesinger, 957 F.2d 78, 83 (2d Cir. 1992); Bellefonte ReIns. Co. v. Argonaut Ins. Co., 757 12 F.2d 523, 527-28 (2d Cir. 1985); Alleghany Corp. v. Kirby, 333 F.2d 327, 333 (2d Cir. 1964). 13
14 However, where a party releases a claim for fraud, it can later challenge that release for
15 fraudulent inducement "only by identifying a separate and distinct fraud from that contemplated 16 by the agreement." DIRECTV Group, Inc. v. Darlene Investments, UC, 2006 WL 2773024 at 17 *4 (S.D.N.Y. 2006)(citing Alleghany Corp., 333 F.2d at 333; Finz, 957 F.2d at 83; Bellefonte.,. 18 757 F.2d at 527-28)(emphasis added). Where the "new" fraud is "a species of the same ... fraud" 19
20 underlying the original agreement, the claim is deemed released. Nycal Corp., 166 F.3d at 1202.
21 In this case, OHI's claim for rescission of the OHI-Wilson Release which was executed 22 in 2001, after OHI and Lee learned of the Lease Agreement does not set forth any "new" fraud 23 which falls within the exception contemplated by the last sentence of Paragraph 9.7. The 24
25 Wilsons' failure to disclose the existence of the Lease Agreement and matters inexorably
-16- intertwined therewith, including the "actual" valuation of the property, is part and parcel the 2 same fraud that prompted the OHI-Wilson Release. 13 3 Additionally, the Lease Agreement was nullified by the Decision and Order nunc pro 4 tunc that was issued by Judge Bordallo in January 25, 2001, and which also predates the OHI- 5
6 Wilson Release. Thus, as a matter of law, it was as if the Lease Agreement did not exist as of the
7 parties' JVA and certainly was not grounds for any claim of fraud excepted in the Release 8 Agreement. 14 9 Furthermore, in stark contrast to his dealings with the Wilsons at the time of the JVA as 10
11 set forth in the Lee Affidavit, OHI and Lee were represented by counsel and received
12 independent legal advice from "their attorneys with respect to the advisability of making the 13 settlement provided for in this [Release] Agreement" (OHI-Wilson Release at 1 9.2 (Feb. 5, 14 2001)); they "made such investigation into the facts pertaining to this settlement and this 15 Agreement as it deems necessary" (/d. at 1 9.3); they ''understand and acknowledge that the 16
17 releases ... are intended to cover all claims for damages that exist as of the date of this [Release]
18 Agreement but which the parties may not now know exist, and which, if known, could materially 19 affect the parties' decision to execute this Agreement, regardless of whether the lack of 20
21 13 om and Lee submit for the Court's consideration the 2011 letter from Captain Hutapea & Associates as support 22 for the Wilsons' misrepresentation as to the "true value" of the Wilson property "retrospective as of May 8, 1995," however the letter notes that "[o]ur research did not disclose evidence of a ground lease termination document." 23 Exhibit E to Om's Exhibits In Support of Opp'n Mot. Dismiss (May 9, 2010). This statement leads the Court to believe that the valuation did not include a consideration of the Decision and Order issued by Judge Michael 24 Bordallo in Donald E. &: Teresita S. Wilson and Joann S. Nauta aka Joann Nauta Sahagon vs. Da Yu Overseas, Inc., CV89l-OO (Jan. 25, 2001), nullifying the Lease Agreement nunc pro tunc to 1994. Thus, om has not 25 presented any "new fraud" which may be excluded from the Release. Moreover, om and Lee claim that they were made aware of the Lease Agreement in 1999 yet failed to pursue any objective valuation of the property until 2011 - 26 12 years after it discovered the existence of the Lease Agreement and I 0 years after the Release was executed. om cannot delay any investigation for a decade and then divert the blame to the Wilsons for failing to disclose material 27 information pursuant to a fiduciary duty that ceased to exist since 2001. 14 om and Lee argue that this Court could and should nullify the 2001 Decision and Order of the Honorable 28 Michael J. Bordallo which cancelled the Lease Agreement nunc pro tunc to 1994. However, that Decision and Order was issued by a court of competent jurisdiction sitting in a matter not assigned to this Court and om and Lee provide no reasonable basis in fact or in law which supports their request.
-17- knowledge is due to oversight, mistake, ignorance, negligence or any other cause, other than by 2 fraudulent conduct by any party to this Agreement" (ld. at <(9.8). 3 In February, 2001, OHI and Lee had knowledge of the 1995 Lease Agreement, had the
benefit and advice of counsel and waived their rights to the protection of Guam law with respect
to general releases when it executed a detailed 11-page Release and Settlement Agreement with
7 the Wilsons. It is, therefore, against public policy to allow OHI' s claims to survive the OHI- 8 Wilson Release under the circumstances. See Texas Standard Oil & Gas, L.P. v. Frankel 9 Offshore Energy, Inc., 394 S.W.3d 753, 774 (Texas Ct. App. 14th Dist. 2012)("Refusing to 10
II honor a settlement agreement-an agreement highly favored by the law-under these facts
12 would invite unfortunate consequences for everyday business transactions and the efficient 13 settlement of disputes. After-the-fact protests of misrepresentation are easily lodged, and parties 14 who contractually promise not to rely on extra-contractual statements- more than that, promise 15 that they have in fact not relied upon such statements-should be held to their word.... If 16
17 disclaimers of reliance cannot ensure fmality and preclude postdeal claims for fraudulent
18 inducement, then freedom of contract, even among the most knowledgeable parties advised by 19 the most knowledgeable legal counsel, is grievously impaired. Axiomatically, fiduciaries, like 20 any other business associates, might wish to ensure fmality to their disputes. Thus, their 21 expressed intent to ensure finality, via a fraudulent-inducement release or disclaimer of reliance, 22
23 as well as their freedom to contract, should be accorded the same respect as the intent of other
24 parties"). Because the OHI-Wilson Release bars OHI from asserting its cross-claims against the 25 Wilsons, the Wilsons are entitled to summary judgment in their favor. 15 26
15 28 The Wilsons also assert that the om-Lee Cross-claims should be dismissed because "there was no business license for any of the years that om or LEE served as the general contractor as part of theNA." Motion at 15 (Mar. 9, 2012). Because the Court has ruled that om's cross-claims fail as a matter of law pursuant to the om-
-18- II. OID's CROSS-CLAIMS ARE BARRED BY THE STATUTE OF LIMITATIONS. 2 Even if the above claims were not barred by the Release- which they are- OHI's cross- 3 claims are dismissed as having been brought beyond the statute of limitations. The claims for 4
5 Rescission/Reformation (First Cause of Action) and Breach of Fiduciary Duty (Second Cause of
6 Action) are each subject to a 3-year statute of limitations period. See 7 GCA § 11305 (3-year
7 statute of limitation for fraud claim); 7 GCA § 11305(d) (3-year statute of limitation for breach 8 of fiduciary duty claim). OHI' s claim for Breach of Contract (Third Cause of Action) must be 9 brought within 4-years of the breach which is the subject of the complaint. See 7 GCA § 10
ll 11303(a) (4-year statute of limitation for breach of contract claim).
12 The Guam Supreme Court in Gayle v. Hemlani has confirmed the fundamental principle 13 of law that the statute of limitations on an action begins to run when "the plaintiff suspects or 14 should suspect that his injury was caused by wrongdoing or that someone has done something 15 wrong to him." 2000 Guam 25124 (citing Custodio v. Boonprakong et al., 1999 Guam 5127). 16
17 The Supreme Court further observed that:
18 A plaintiff need not be aware of the specific acts necessary to establish the claim. . . . Once the plaintiff has a suspicion of 19 wrongdoing, and therefore an incentive to sue, he must decide 20 whether to file suit or sit on his rights. . . . Consequently, if a suspicion exists, the plaintiff cannot sit back and wait for the facts 21 to fmd him as the burden of fmding the facts falls upon his shoulders. 22 /d. 23 Here, the statute of limitations period began to run as soon as OHI became suspicious of 24
25 wrongdoing. That suspicion came in 1999, when Lee, the president of OHI, discovered that a
27 Wilson Release, the Court does not rule on the licensing issue. Additionally, because this Court finds that the OID- 28 Wilson Release bars om· s recovery against the Wilsons for all actions arising out of the JVA as a matter of law, the Court does not reach the question of whether the om-Lee Cross-Claim adequately pleads "Fraud" as required under Guam R. Civ. Proc. Rule 9(b).
-19- 99-year lease existed on the property. See Lee Affidavit at 3, 16 (May 9, 2002). It was at this 2 time that OHI knew or should have known that there was a reasonable basis for suspecting the 3 possible unraveling of the Joint Venture and a breach of the JVA as well as the fiduciary duties 4 attendant thereto and conducted a reasonable investigation into the existence of the Lease 5
6 Agreement. To its detriment, OHI posits that because a fiduciary duty existed between OHI and
7 the Wilsons, it did not need to perform any investigation of its own or conduct any due diligence, 8 implying that where a fiduciary duty exists, all reasonableness in business dealings is apparently 9 thrown out the window. 16 This is a complete misunderstanding of the law. 10
11 Regardless of whether a fiduciary relationship existed, OHI was still required to exercise
12 reasonable diligence in discovering wrongful acts. "The existence of a fiduciary relationship 13 between the parties is a fact to consider in determining whether a plaintiff has exercised 14 reasonable diligence in the inquiry of the existence and cause of his injury." Gayle, 2000 Guam 15 25 1 25 (citing Bourland v. Salas, DCA Civ. No. 82-0224A, 1986 WL 68919 (D. Guam Ap. 16
17 Div., Oct. 24, 1986)). "[A]lthough the relationship does relax the requirement of diligent
18 inquiry, discovery does not mean actual knowledge." ld. "Discovery occurs when a plaintiff 19 could have discovered the wrongful acts with reasonable diligence." ld. "Reasonable diligence 20 is tested by an objective standard, and when the uncontroverted evidence irrefutably 21 demonstrates that the plaintiff discovered or should have discovered the fraudulent conduct, the 22
23 issue may be resolved by summary judgment." Id. As stated above, OHI was suspicious of the
24 Wilsons' alleged wrongdoings as early as 1999. OHI then had the obligation under Hemlani to 25 decide whether to file suit or sit on its rights. OHI apparently chose the latter, and did so for over 26
28 16 OHI-Lee's Opp'n. Mot. Dismiss at Tfll-12 (May 9, 2010).
-20- 12 years after its initial discovery. As a result, its claims are time-barred and the Wilsons are 2 entitled to summary judgment on the issue. 3 Ill. LEE'S MENTAL DISTRESS CLAIM (FOURm CAUSE OF ACTION) IS TIME-BARRED. 4 Although it is unclear whether Count 4 is a claim for libel or slander, harassment, or 5
6 intentional infliction of emotional distress, the Court fmds that the claim should be dismissed on
7 statutes of limitation grounds. Claims for libel or slander are subject to a 1-year state of 8 limitation. See 7 G.C.A. § 11307(3). Harassment and intentional infliction of emotional distress 9 claims are subject to a 2-year statute of limitation period. See 7 G.C.A. § 11306(a). 10
II In this case, the conduct complained of occurred in the 1990s, with the latest incident
12 allegedly occurring in April, 2007, well over two years before the date the Cross-Claim was filed 13 on May 19, 2009. See OHI-Lee Cross-Claim, at 5
17 2007 confrontation. See Declaration of Jin Hee Lee Re: Motion to Vacate, at 8
18 2008). Therefore, the Wilsons are entitled to summary judgment on Count 4. 19 IV. WILSONS HAD No OBLIGATION To AssiST Offi IN REsOLVING LIENS. 20 OHI also claims that the Wilsons breached the Release by breaching their duty of good 21 faith and fair dealing by failing: ( 1) to participate in settlement negotiations with the venture's 22
23 creditors and by refusing to quitclaim or transfer rights to individual properties which could have
24 been used to satisfy creditors' claims; and (2) to notify OHI and Lee of the true state of this 25 litigated matter and to seek OHI and Lee's cooperation in the litigation and by conducting 26 frivolous litigation regarding the transfer of certificates of title. See OHI-Lee Cross-Claim, at
28 24(C-D)(May 19, 2009). None of the acts were ever made a part of the OHI-Wilson Release
-21- and, as the Guam Supreme Court has recognized, "the relevant case law supports the notion that 2 a 'covenant of good faith and fair dealing... cannot impose substantive duties or limits on the 3 contracting parties beyond those incorporated in the specific terms of their agreement. " Quijano 4 v. Atkins-Kroll, 2008 Guam 141:2 n. 2 (quoting Guz v. Bechtel Nat'llnc., 8 P.3d 1089, 1110 5
6 (Cal. 2000)). Indeed, all of the obligations to resolve materialmen liens on the property was left
7 solely to OHI. OHI has submitted no set of facts which would contradict the evidence before 8 this Court that the Wilsons were not required to assist OHI in resolving the liens. As such, the 9 Wilsons are entitled to summary judgment on OHI-Lee's claim of breach of duty of good faith 10
11 and fair dealing.
12 V. Offi'S REQUEST FOR AN ACCOUNTING IS DENIED. 13 OHI's Opposition to Wilsons' Motion to Dismiss is not simply an "opposition" to the 14 motion, but is also filled with requests for this Court to grant certain relief not pled in the OHI- 15 Lee Cross-Claims, such as the request to nullify Judge Bordallo's Decision and Order in a 16
17 wholly unrelated case not even before this Court and a counter-motion to dismiss the Wilsons'
18 Quiet Title claim (which was not brought properly before the Court and which was not addressed 19 by the Wilsons in their Reply) and, fmally, a request to permit OHI to amend its cross-claim to 20 state a cause of action against the Wilsons for an accounting - a final request which is well 21 beyond any reasonable time frame for OHI to amend its Answer and Cross-Claims. 22
23 It is well settled that the right to an accounting is premised "upon the existence of a
24 confidential or fiduciary relationship and a breach of the duty imposed by that relationship 25 respecting property in which the party seeking the accounting has an interest." Madison Hudson 26 Assoc., UC v. Newmann, 2005 WL 1941229 at *11 (N.Y. Sup. 2005)(quoting Palazzo v. 27
28 Palazzo, 503 N.Y.S.2d 381 (App. Div., 1st Dep. 1990). Moreover, in order to obtain a court
-22- order for an accounting, the plaintiff "must show a demand for an accounting and a failure or a 2 refusal by the partner with the books, records, profits or other assets of the partnership in his 3 possession to account to the other partner." /d. at 12 (quoting Blaustein v. Lazar Borck & 4 Mensch, 161 A.D.2d 507, 508, 555 N.Y.S.2d 776 (App. Div. 1st Dept. 1990). 5
6 The Court denies OHI' s request to amend its Cross-Claim to state a cause of action for
7 accounting because the Joint Venture terminated as of 2001, pursuant to the Release Agreement. 8 At that time, the fiduciary duty or any other duty that the parties may have owed to each other by 9 virtue of the joint venture ceased, and, therefore, OHI is not entitled to an accounting as a matter 10
11 of law. Additionally, OHI has not established that, even if a fiduciary duty exists (which it does
12 not), it had made a demand for an accounting met with a refusal by the Wilsons. 13 V. OID'S REQUEST TO DISMISS WILSONS' CROSS-CLAIMS. 14 OHI claims that if its cross-claims are barred by the statute of limitations, then the 15 Wilsons' cross-claims must also be similarly barred because "any breach of the parties Release 16
17 and Settlement Agreement would have occurred on or before November 30, 2001." Opp'n. Mot.
18 Dismiss at 16, 1 53 (May 9, 2010). This argument completely misstates the Wilsons' cross- 19 claims. The Wilsons assert that the parties entered into the Release Agreement on February 5, 20 2001, which was later amended on November 30, 2001 (Wilson Cross-Claim at 111 (April 14, 21 2006)); that under the terms of the Release Agreement, OHI was required to remove certain liens 22
23 from a portion of the Wilson lands (/d. at 112); that OHI's failure to remove the liens from the
24 property constitutes a breach and material event of default of the Release Agreement, resulting in 25 OHI's forfeiture of all of its interests in the property (/d. at 7, 113)(emphasis added). Contrary to 26 OHI's contention, a breach of the conditions of the Release Agreement (see fi5.3, 7.b.(ii) and 8) 27
-23- could only have occurred after its execution and not before November 30, 2001. Consequently, 2 OHI' s request to dismiss the Wilsons' Cross-claim is denied. 3 VI. ATTORNEYS FEES. 4 OHI and Lee seek attorney's fees under Paragraph 5 of the OHI-Wilson Release. Having 5
6 ruled that the cross-claims of OHI and Lee are dismissed for the reasons herein stated, OHI and
7 Lee are not entitled to any award of attorney's fees. The Wilsons, on the other hand, by their 8 Reply, seek attorneys fees pursuant to the same provision invoked by OHI. 9 With regard to attorney fees in civil cases, Guam follows the "American Rule," which 10
11 provides that each party bears its own litigation expenses, including attorney fees. Rahmani v.
12 Park, 2011 Guam 7 I 59 (citing Sule v. Guam Bd. of Dental Exam'rs, 2008 Guam 20 I 52 13 (quoting Fleming, 2003 Guam 417)). However, statutory or contractual provisions authorizing 14 attorney fees are exceptions to the American Rule. ld. Paragraph 5 of the Release provides, in 15 relevant part, as follows: "OHI shall indemnify and hold the Wilsons harmless for any 16
17 judgments, cost, loss, damage, or expense, including reasonable attorneys fees, arising from any
18 claims." OHI-Wilson Release at 4, I 5 (Feb. 5, 2001). As the Wilsons have been forced to 19 defend against the cross-claims of OHI and Lee, which arise out of and are specifically 20 encompassed in the Release Agreement, the Wilsons are entitled to reasonable attorneys fees and 21
costs to be determined at a hearing on the matter. 22
23 CONCLUSION
24 Based on the foregoing: (1) the Wilsons' Motion to Dismiss or, In the Alternative, For 25 Summary Judgment is GRANTED; (2) OHI-Lee's request that the Wilsons' Cross-Claim be 26 dismissed is DENIED; (3) OHI-Lee's request for attorney's fees is DENIED; and (4) the 27
-24- Wilsons' request for reasonable attorney's fees and costs is GRANTED, with the amount of such 2 fees and costs to be determined at a subsequent hearing on the matter.
SO ORDERED, this Q~t\\ day of September, 2013. 3
7 Judge, Superior Court of Guam
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