Southwest Slopes, Inc. v. Lum

918 P.2d 1157, 81 Haw. 501, 1996 Haw. App. LEXIS 67
CourtHawaii Intermediate Court of Appeals
DecidedJune 19, 1996
Docket16916
StatusPublished
Cited by11 cases

This text of 918 P.2d 1157 (Southwest Slopes, Inc. v. Lum) is published on Counsel Stack Legal Research, covering Hawaii Intermediate Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Southwest Slopes, Inc. v. Lum, 918 P.2d 1157, 81 Haw. 501, 1996 Haw. App. LEXIS 67 (hawapp 1996).

Opinion

BURNS, Chief Judge.

Defendant Gene K.H. Lum (Lum) appeals from the circuit court’s February 22, 1993 judgment against him and in favor of plaintiffs Southwest Slopes, Inc. (Southwest), a Kansas corporation, and Robert L. Rice (Rice) (collectively, Plaintiffs) for $598,000, plus $117 costs and $4,625.36 attorney fees. Rice is also Southwest’s president, director, and pi'incipal stockholder. We vacate the February 22, 1993 judgment and remand for further proceedings in accordance with this opinion.

*503 FACTS

On May 1, 1991 on a standard Deposit, Receipt, Offer and Acceptance (DROA) form, Lum, as “agent[,]” submitted an offer to purchase from Plaintiffs approximately 265.84 acres of vacant land (the Land) located in ‘Opihihale, South Kona, Tax Map Keys 3-8-7-14-6 and -23. Plaintiffs were represented by Century 21 Associated Realty, Inc. (Century 21). On May 2, 1991 Plaintiffs submitted a counteroffer which Lum accepted (the Contract). The purchase price was $2,650,000. The initial down payment was $20,000. An additional $80,000 was due five days after the acceptance. Closing was scheduled on or before December 1, 1991 at the Kona office of Long & Melone Escrow, Ltd. (Escrow). On May 7, 1991 Escrow received Sasaki Saison, Inc.’s 1 check in the amount of $100,000. Paragraph 2(d) of the Contract states as follows:

(d) Title: Seller agrees to convey the property with warranties vesting marketable title in Buyer, free and clear of all liens and encumbrances except as shown on the Preliminary Title Report issued by Title Guaranty 9/18/90 and any other covenants, easements, reservations or restrictions now of record which do not materially affect the value of the property.

The name of the buyer and the buyer’s tenancy were both “to be determined[.]”

In an April 1, 1992 affidavit filed on April 9, 1992, Rice stated in relevant part as follows:

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2. On or about August 25, 1988, acting on behalf of Southwest Slopes, Inc., and acting through our attorney, Robert L. Smith, we purchased the subject property in a commissioner’s sale....
¾: ⅜ * ⅜ ⅜ ⅜
6. On or about September 18, 1990 I obtained a preliminary title report listing all liens and encumbrances against the property.
7. On or about May 1, 1991 I entered into a contract on behalf of Southwest Slopes, Inc. to sell the subject property to [Lum]_ I attached a copy of the preliminary title report to the DROA contract specifically setting forth the status of title as I knew it to be.
* * * * * *
12. I am not an archaeologist, have never commissioned an archeological study of the property, am unaware of any prior archeological reports and am not trained in the recognition of archeological sites. At the time that I entered into the contract, (Exhibit “B”), I had no reason to believe that the subject property contained anything that would be considered archeologi-eally significant.

The following paragraph was expressly deleted from the Contract:

TIME IS OF THE ESSENCE:
If either Buyer or Seller for reasons beyond his control cannot perform his obligation to purchase or sell the property by the closing date, then such party by giving escrow written notice prior to the closing date called for in this contract with copies to all parties to this contract, can extend closing for no longer than 30 calendar days to allow performance. Thereafter time is of the essence and the default provisions of [this contract] apply. Any further extension must then be agreed to in writing by both parties.... This provision relates only to the extension of the closing date.

Exhibit A to the Contract specified in relevant part as follows:

3. DUE DILIGENCE PERIOD. Buyer shall be given 45 days from acceptance date of offer to have an inspection period [sic] conducted on all or part of the property by an expert of Buyer’s choice. This offer is contingent upon Buyer’s approval within 45 days from acceptance date of offer of any written or oral reports resulting from said inspections. Seller agrees to give Buyer’s , agent reasonable access to the property so that the inspections and reports may be completed in the 45 day period.
*504 4. If Buyer notify [sic] escrow and Seller in writing of Buyer’s disapproval of any reports during the due diligence period, the contract shall be deemed cancelled and escrow shall return $80,-000 to Buyer within 5 days after receipt of said written notification.
5. If no notice of disapproval has been received by escrow and the Seller, Buyer shall deposit an additional nonrefundable deposit of $600,000 on or before June 30, 1991 and an additional non-refundable deposit of $25,000 on August 1, 1991, September 1, 1991, October 1, 1991, and November 1, 1991.

On May 9, 1991 Shirley Smith (Shirley), manager for the Kona office of Long & Mel-one Escrow, Ltd., sent a letter to Lum “requesting information concerning title and tenancy, as that was not specified in the DROA contract.” On May 14, 1991 Lum identified Shin Investments, Inc., as the principal in the subject transaction.

The forty-five-day due diligence period expired in the middle of June 1991. On July 29, 1991 James H. Sakoda (Sakoda) wrote a letter to Escrow and sent a copy to Robert L. Smith (Smith), Esq., counsel for Southwest. This letter states in relevant part as follows:

We are legal counsel for [Lum], who is the agent of the Buyer in the Escrow for the purchase of the real property....
Mr. Lum has asked our office to give you, as the Escrow Holder, formal notice that the Buyer is terminating its purchase of the Property based upon the material breach by the Seller of its duty to fully disclose all relevant facts known about the Property to the Buyer. In particular, the Seller failed to fully disclose to Mr. Lum the existence of many archaeological findings on the Property, which would severely limit the Buyer’s ability to use the Property and, as a consequence, substantially diminish the value of the Property to the Buyer.
Mr. Lum contracted with ERCE of Hawaii to conduct an archaeological reconnaissance of the Property. ERCE’s findings are that:
1. A major archaeological site, consisting of the remains of an ancient Hawaiian Village is situated on the level area near the coastline where the Buyer is planning to develop. The discovery of the Hawaiian Village on this site make[s] it highly unlikely that any facilities could be built on this level area.
2. There are over 112 archaeological findings on the Property, and four to five of these findings are major archaeological sites. These findings would further restrict development of the Property.
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Bluebook (online)
918 P.2d 1157, 81 Haw. 501, 1996 Haw. App. LEXIS 67, Counsel Stack Legal Research, https://law.counselstack.com/opinion/southwest-slopes-inc-v-lum-hawapp-1996.