K.D.I. Guam, INC v. East-West INC, Mamoru Endo, Pacific American Title Insurance & Escrow Co., and Does 1-10

• Court: Superior Court of Guam
• Decided: January 21, 2009
• Docket: CV0137-07
• Status: Unknown

Opinion

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K.D.I. GUAM, INC., 1 -. r:r. - ) Plaintiff, 1 CASE NO. CV0137-07 1 VS. ) DECISION AND ORDER ) EAST-WEST INC., MAMORU ENDO, 1 PACIFIC AMERICAN TITLE INSURANCE ) & ESCROW CO., and DOES 1-10, ) ) Defendants. 1 1

II INTRODUCTION

II Guam This matter came before the Honorable Judge Steven S. Unpingco on the Plaintiff K.D.I. Inc.'s ("K.D.I.") Motion for Summary Judgment against Defendant Marnoru End I ("Endo"), the Defendant East-West Inc.'s ("East-West") Motion for Summary Judgment, and th Defendant Pacific American Title Insurance & Escrow Co.'s ("PATICO") Motion for Surnrn Judgment. All three motions were filed with the Court on January 14,2008. Attorney Rawle M. T. Mantanona appeared on behalf of K.D.I., Attorneys Elyze J. McDonald and Donald V. Calvo appeared on behalf of East-West, Attorney Anthony R. Carnacho appeared on behalf o Endo, and Attorney Bill R. Mann appeared on behalf of PATICO. Oral arguments were denie pursuant to the Local Rules of the Superior Court of Guam CVR. 7.l(e)(l). See Guam R. Civ. P. 77(b), 78. Having considered the parties' briefs and the applicable law, the Court now issues th I( following Decision and Order. I BACKGROUND This dispute arose out of a series of events over the sale of Lot No. 5372-2-R1 ir Mangilao, Guam in 1997. Plaintiff K.D.I. is a closely held Guam corporation who owned the land and was founded to develop and sell the land in question. Defendant Endo is the only officer of K.D.I. who resides on Guam and he allegedly deceived K.D.I. and its other officers in

Page 1 of 7 11 the land in the disputed transaction with Endo. Defendant PATICO is the escrow agent of the( sale. In its amended complaint, K.D.I. alleges that Endo sold the land to East-West in 199 11 without authorization and then concealed the sale from K.D.I. until 2006. K.D.I. prays to( 11 recover the property through quiet title, and to recover damages on the theories of fraud an 4 breach of trust against Endo, and on the theories of interference with property, unjust enrichment and promissory estoppel against all defendants. DISCUSSION Summary Judgment Standard 11 A motion for summary judgment is govern l2 - ("GRCP") Rule 56, which provides that 'The judgment sought shall be rendered forthwi l3 if. ..there is no genuine issue as to any material fact and that the moving party is entitled to l4 judgment as a matter of law." See GRCP Rule 56(c). Summary Judgment must be grante 15 "forthwith," unless the court determines that furth GRCP 56(f). The party who is seeking summary jud 17 no genuine issues of material fact. See Celotex Corn. v. Katrett, 477 U.S. 317, 106 S.Ct. 254 '8 (1986). Moreover, once the moving party has met this burden, the nonmoving party must com 19 forward and make some a h a t i v e showing with sp 20 claims and that there is a genuine issue of material fact for trial. Id. See also 21 Indus. Co. V. Zenith Radio Corn., 475 U.S. 574,587,lO 22 "A 'material' fact is one that is relevant to an element of a claim or defense and whos 23 existence might affect the outcome of the suit." See 24 Contractors Ass9n.,809 F.2d 626, 630 (9&Cir.1987 25 are no genuine issues of material fact, the non-mo 26 contained in the complaint, but must produce at least some significant probative evidenc 27 tending to support the complaint. See Anderson v. Libertv Lobby. Inc., 477 U.S. 242, 249, 10

Page 2 of 7 Where credibility is at issue, summary judgment may not be granted. Only after evidentiary hearing or full trial can credibility issues be appropriately resolved. See Koracon, Industries, Inc., 575 F.2d 692, 698 (9& Cir.1978), cert denied, 439 U.S. 953 (1978 Discretion plays no real role in the grant of summary judgment. See Id. In addition, the co must view the evidence and draw inferences in the light most favorable to the non-movant. Se Tzunp: v. State Farm Fire and Cas. Co., 873 F.2d 1338, 1339 (9th Cir. 1989). The "court' ultimate inquiry is to determine whether the 'specific fact' set forth by the nonmoving party coupled with undisputed background or contextual facts, are such that a rational or reasonabl jury might return a verdict in its favor based on that evidence." See T.W. Elec. Serv., 809 F.2d 63 1. K.D.I.'dWotion for Summary Judgment against Defendant Endo Under Guam law, an essential element of fkaud is misrepresentation. See Export Co. v. Oka Towers Corp., 2000 Guam 3, f 23; 2000 WL 32127 (Sup. Ct. Guam 2000). In this case, K.D.I. claims that Endo committed fraud when he sold K.D.I.'s property t East-West. An essential element of K.D.I.3 claim is whether Endo misrepresented and withhel fiom K.D.I. the fact that he sold the property in 1997. K.D.I. points to Endo's depositio testimony to argue that he failed to tell K.D.1 of the sale until 2006. Endo points to conflictin portions of the same testimony to argue that he informed K.D.I. of the sale when it happened i 1997. This date is in dispute and when viewed in the light most favorable to the nonrnovant, Endo, a reasonable jury could return a verdict in Endo's favor on the basis that he notified K.D.I. of the sale when it occurred in 1997. See T.W. Elec. Serv., 809 F.2d at 63 1. Furthermore, End appears to have given conflicting accounts and is generally vague in his deposition testimon This presents an issue of credibility that must be resolved in open court. See Industries, Inc., 575 F.2d at 698. For these reasons, summary judgment is inappropriate agains Endo, and the motion is denied. East-West's Motion for Summary Judgment against Plaintiff K.D.I. Guam East-West moves for Summary Judgment on four grounds: 1) the statute of limitation has lapsed; 2) the doctrine of laches prevents recovery; 3) Endo had the apparent authority t bind K.D.I.; and 4) East-West is protected as a bona fide purchaser of the land.

Page 3 of 7 element of diligence on the part of the plaintiff to discover and claim the injury. See Election Comm'n v. Williams, 104 F.3d 237,242 (9th Cir. 1996) and Responsible Choices for All Adults Coalition, 2007 Guam 20,177; 2007 WL 4689002 (Sup. Ct Guam 2007). In this case, East-West argues that K.D.I. clearly did not exercise the diligence requir t o toll the applicable statute of limitations or to overcome the defense of laches. East-Wes points to the deposition testimony of K.D.I.'s officers, including Endo, to argue that it i undisputed that K.D.I. did not perform the required diligence in order to avoid these bars t relief. However, K.D.I. argues that despite any amount of diligence, the transaction w concealed from K.D.I. by its Vice-President Endo through forged reports, forged offici documents, and other affirmative misrepresentations. As discussed above, Endo's testimon raises an issue of credibility which must be resolved in open court. See Inc.,575 F.2d at 698. In an abundance of caution, it is inappropriate for this Court to make conclusive finding of undisputed fact that K.D.I. failed to exercise enough diligence to uncov such extensive alleged fiaud without more evidence. Therefore, summary judgment should no be granted on the basis of a statute of limitation or a defense of laches. Under Guam law, a buyer is only protected by apparent authority or by a bona fid purchase when they are unaware of any false authority or fraud. Apparent authority exists wher a third person reasonably believes the agent has the authority to act on behalf of the principa See Tedtaotao v. One-Eighth Undivided Interest in Lot 98, Civil Action No. 95-00147A, Orde Aflrming Judgment (D. Ct. Guam Sept. 30, 1996) citing 18 GCA 4 20214. Likewise, a bon fide purchaser exists where purchase is made in good faith and without actual notice of another' interests or of fraud. See Taitano v. Luian, 2005 Guam 26, fi 27; 2005 WL 3579088 (Sup. Ct. Guam 2005) citing 2 1 GCA 5 37 102. In this case, East-West argues that their purchase of the land is protected as a matter o law under the doctrines of apparent authority and the bona fide purchaser. East-West alleges tha it is undisputed that Endo was cloaked with the apparent authority to sell the property and tha East-West bought the land in good faith as a bona fide purchaser. However, K.D.I. dispute whether East-West acted in good faith or actually believed that Endo had the authority to sell th property. For example, K.D.I. points to a portion of Endo's deposition testimony in which h

Page 4 of 7 I(K.D.1. and its shareholders in order to effectuate the sale. Endo's allegation is confusing an 11 further compounds the credibility issues that must be resolved in open court. See ~ o r a c o d 4 I (Industries. Inc., 575 F.2d at 698. Endo's allegation of bad faith, when viewed in the light of the/ background facts and allegations, is such that a reasonable jury could return a verdict in K.D.I.' favor based upon East-West's alleged misdeed. See T.W. Elec. Serv., 809 F.2d at II Furthermore, without some significant probative evidence from either party tending to support o1 I ISee deny this testimonial dispute, the Court cannot make a finding of undisputed fact on the matter1 Libertv Lobby, Inc., 477 U.S. at 249. For these reasons, a dispute remains over a materi fact of East-West's defenses and summaryjudgment must be denied. PATICO's Motion for Summary Judgment against Plaintiff K.D.I. Guam PATICO and K.D.I. do not dispute any of the facts regarding the escrow procedure an 1 111(the events of the 1997 sale as they relate to PATICO. They do not dispute the facts that PATIC complied with the escrow instructions and did not discover any fraud. Because there are no( "I I Imaterial disputes of fact in this matter, summary judgment remains appropriate. See GRCP ~ u l e l Under the law, an escrow agent has the duty to comply with the escrow instructions and to disclose known fraud. See Summit Financial Holdings, Ltd. v. Continental Lawvers Title Com~any,41 P.3d 548,27 Cal.4th 705 (2002). Some of our sister jurisdictions apply the duty of' disclosure where facts actually known to the escrow agent present substantial evidence of fiaud,

11 however it is clear that an escrow agent does not have the duty to investigate for fraud. Tne( II Supreme Court of Arizona held, "Although not required to investigate, when the [escrow] agead I(is aware of facts and circumstances that a reasonable escrow agent would perceive 'as evidence1 of fraud,' then there is a duty to disclose." See Burkons v. Ticor Title Ins. Co. of California, 813 P.2d 710,718,168 Ariz. 345,353 (1991). The Supreme Court ofNevada similarly held, [An] escrow agent has a duty to disclose fraud committed by another party to the escrow "if the facts actually known to the escrow agent present substantial evidence of fiaud.". ..[An] escrow agent has no duty to investigate circumstances surrounding a particular sale in order to discover fraud.

See Mark Properties, Inc. v. National Title Co., 34 P.3d 587, 590-91, 117 Nev. 941, 945 (2001 citing Burkons 813 P.2d at 720.

Page 5 of 7 In this case, the parties do not dispute these established duties of an escrow agent. Instead, K.D.I. argues that, under Burkons, PATICO should have reasonably perceived th evidence of fraud by obtaining K.D.I.'s articles of incorporation. K.D.I. asserts that PATIC d 01 * -

was obligated to interpret these documents, which were outside of escrow, in order to determin if Endo correctly held a power of attorney and if K.D.I.'s shareholders correctly agreed to sel K.D.I.'s property. This assertion misapplies the duty to reasonably perceive fraud from Burkons 31 as the fiaud in this case could only be discovered with research outside of escrow, and the fiau ,:' in Burkons was apparent from the documents within escrow. The Burkons Court affirms that duty to disclose fraud, "does not require the escrow agent to investigate and search for See Id. at 718; and Mark Pro~erties,34 P.3d at 590-91. In this case, it is not disputed PATICO did not find the documents in escrow to be fraudulent. The parties agree that the on1

44 way to discover the suggestion of fraud would be to obtain K.D.I.'s articles of incorporation an to interpret the legal meanings of words like "quorum" as they apply to K.D.I. Such investigation is above and beyond any recognized responsibility of an escrow agent. Burkons, 813 P.2d at 718; and Mark Properties, 34 P.3d at 590-91; and Summit Financial, 5e4 P.3d at 551-52. PATICO has no duty to go outside of escrow to discover fiaud, and because th parties agree that no fiaud was in fact discovered in 1997, PATICO did not breach any duty disclosure to K.D.I.. Furthermore, as discussed above, it is undisputed that PATICO faithful1 performed its duties as escrow agent. Therefore, K.D.L9s claims against PATICO fail and summaryjudgment ma$ be granted in favor of PATICO. /// /I/ ///

Page 6 of 7 CONCLUSION Based upon the foregoing, K.D.I.'s Motion for Summary Judgment against Endo is hereby DENIED, East-West's Motion for Summary Judgment is hereby DENIED, and PATICO's Motion for Summary Judgment is hereby GRANTED.

SO ORDERED this 31 day of January, 2009.

HONORABLE STEVEN ~~UNPINGCO Judge, Superior Court of Guam

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