Preview:

NO. 22323 IN THE INTERMEDIATE COURT OF APPEALS OF THE STATE OF HAWAI#I

BUSINESS BROKERS HAWAII, INC., Plaintiff/Counterclaim Defendant-Appellant, vs. FTF, INC., dba MAUI MOUNTAIN CRUISERS, a Hawaii corporation, JON THURO, CHERYL THURO, Defendants/ CounterclaimantsAppellees, JOHN DOES 1 THROUGH 10, JANE DOES 1 THROUGH 10, DOE PARTNERSHIPS 1 THROUGH 10, DOE CORPORATIONS 1 THROUGH 10, AND DOE GOVERNMENTAL ENTITIES 1 THROUGH 10, Defendants.

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

CIVIL NO. 97-0120(3) APPEAL FROM 1) ORDER GRANTING DEFENDANTS JON THURO AND CHERYL THURO PARTIAL SUMMARY JUDGMENT AGAINST PLAINTIFF BUSINESS BROKERS HAWAII, INC., AND DENYING RULE 54(B) CERTIFICATION, FILED SEPTEMBER 11, 1998; 2) ORDER GRANTING DEFENDANT FTF, INC.'S MOTION FOR PARTIAL SUMMARY JUDGMENT RE GENERAL AND PUNITIVE DAMAGES, FILED SEPTEMBER 11, 1998; 3) ORDER GRANTING DEFENDANT FTF, INC.'S MOTION FOR SUMMARY JUDGMENT AGAINST PLAINTIFF BUSINESS BROKERS HAWAII, INC., FILED OCTOBER 8, 1998; 4) ORDER GRANTING DEFENDANTS FTF, INC., JON THURO, AND CHERYL THURO'S MOTION FOR ATTORNEYS' FEES AND COSTS FILED DECEMBER 3, 1998, FILED ON DECEMBER 28, 1998 & 5) FINAL JUDGMENT, FILED JANUARY 20, 1999 SECOND CIRCUIT COURT

MEMORANDUM OPINION Plaintiff-Appellant Business Brokers Hawaii, Inc. (Plaintiff) appeals the adverse January 20, 1999 Final Judgment of the Circuit Court of the Second Circuit in favor of Defendants/Counterclaimants-Appellees FTF, Inc. dba Maui Mountain -1-

Cruisers (Defendant Cruisers), and Jon Thuro and Cheryl Thuro (the Thuro Defendants). Plaintiff also appeals the following orders of the circuit court underlying the Final Judgment: (1) Order Granting Defendants Jon Thuro and Cheryl Thuro Partial Summary Judgment Against Plaintiff Business Brokers Hawaii, Inc., and Denying Rule 54(b) Certification, filed September 11, 1998; (2) Order Granting Defendant FTF, Inc.'s Motion for Partial Summary Judgment Re General and Punitive Damages, filed September 11, 1998; (3) Order Granting FTF, Inc.'s Motion for Summary Judgment Against Plaintiff Business Brokers Hawaii, Inc., filed October 8, 1998; and (4) Order Granting Defendants FTF, Inc., Jon Thuro, and Cheryl Thuro's Motion for Attorneys' Fees and Costs Filed December 3, 1998, filed December 28, 1998. For the following reasons, we vacate the court's award of attorneys' fees of $53,157.24 and remand with instruction that the amount be reduced to $21,225.00. all other particulars. We affirm the judgment in

Background. On February 20, 1997, Plaintiff filed a Verified Complaint1 against Defendant Cruisers and the Thuro Defendants.

1

The verification was in the following form: STATE OF HAWAII ) ) COUNTY OF MAUI )

SS.

-2-

Insofar as it is usefully descriptive, the complaint alleged as follows: 1. Plaintiff . . . is a Hawaii corporation, engaged in the business of listing and brokering the sale of real estate and business assets . . . in the County of Maui, State of Hawaii. 2. [Defendant Cruisers] is a Hawaii corporation . . . engaged in the business of providing bicycle tours . . . in the County of Maui, State of Hawaii. 3. [The Thuro Defendants] are husband and wife and . . . are also believed to be shareholders, officers, directors and/or employees of Defendant Cruisers. . . . . 5. On or about July 21, 1996, Plaintiff as "Broker" and Defendant Cruisers as "Seller" entered into that certain "Listing Agreement For Sole And Exclusive Right To Sell" ("THE LISTING AGREEMENT") under the terms of which Plaintiff agreed to procure a "ready, willing and able" purchaser for the assets of Defendant Cruisers at the price set forth thereon in return for which Plaintiff would receive a commission equal to ten percent (10%) of the selling price. A

VERIFICATION MILTON DOCKTOR, President of [Plaintiff], a Hawaii corporation, being first duly sworn, upon oath deposes and states that he has read the foregoing Verified Complaint, knows the contents thereof, and that the same are true to the best of his information, knowledge and belief. BUSINESS BROKERS HAWAII, INC. By: /s/ Its President Subscribed and sworn to before me this 19th day of February, 1997. /s/ Notary Public, State of Hawaii My commission expires: 2/6/2000

-3-

true and correct copy of the Listing Agreement is attached hereto as Exhibit 1. 6. In the course of completing The Listing Agreement, and in order to aid in the sale of the assets of Defendant Cruisers, Plaintiff was supplied with certain material information directly by [t]he Thuro Defendants upon which it would rely in marketing the assets of Defendant Cruisers and upon which any prospective purchaser would rely in deciding whether to purchase those assets. Among this material information was the representation that the "Annual Pre-Tax Profit" of Defendant Cruisers was $400,000.00. 7. The material information that the sum of $400,000.00 was the Annual Pre-Tax Profit of Defendant Cruisers was false and misleading, and known to be false and misleading to [t]he Thuro Defendants at the time it was given to Plaintiff and subsequently acknowledged as false and misleading by [t]he Thuro Defendants. 8. Upon discovery by Plaintiff of the false and misleading information supplied by [t]he Thuro Defendants, Plaintiff and Defendant Cruisers executed that certain "Amendment To The Listing Contract" ("THE AMENDMENT") under which the sales price for the assets of Defendant Cruisers was reduced to $849,000.00 and other terms adjusted accordingly. A true and correct copy of The Amendment is attached hereto as Exhibit 2. 9. By that certain "Offer To Purchase" ("THE OFFER") dated October 31, 1996, Mr. Joseph Luithly ("MR. LUITHLY") agreed to purchase the assets of Defendant Cruisers at the price and upon all of the terms set forth in The Listing Agreement as modified by The Amendment. A true and correct copy of The Listing Agreement [sic] is attached hereto as Exhibit 3. 10. The Offer was immediately delivered to Defendant Cruisers, however, Defendant -4-

Cruisers refused to accept the Offer and though often demanded continues to refuse and decline to accept the Offer and to consumate [sic] the sale and purchase of the assets of Defendant Cruisers to Mr. Luithly. COUNT I . . . . 12. Plaintiff complied with its duties and obligations under The Listing Agreement and The Amendment by procuring a purchaser who was ready, willing and able to purchase the assets of Defendant Cruisers on the terms set forth in The Listing Agreement and The Amendment. 13. Plaintiff has demanded that Defendant Cruisers pay to it the commission required by The Listing Agreement and The Amendment, namely ten percent (10%) of the total purchase price of $849,000.00, for the sum of $84,900.00, but Defendant Cruisers has failed and refused to do so and continues to fail and so refuse to pay the commission. 14. Defendant Cruisers has breached the terms of The Listing Agreement and The Amendment. 15. As a result of the breach of Defendant Cruisers, Plaintiff is entitled to recover its commission in the sum of $84,900.00, together with such general, special and consequential damages as shall be shown at a trial of this case. 16. Defendant Cruiser's breach is intentional. 17. breach of Plaintiff a sum not As a result of the intentional contract by Defendant Cruisers, is entitled to punitive damages in less than $500,000.00.

-5-

COUNT II . . . . 19. The Thuro Defendants have at all times used the [sic] deployed Defendant Cruisers as their alter ego. 20. The Thuro Defendants are jointly and severally liable to Plaintiff for all damages due and owing by Defendant Cruisers. 21. In using and deploying Defendant Cruisers, [t]he Thuro Defendants actively misrepresented material facts concerning Defendant Cruisers which [t]he Thuro Defendants knew or should have known would affect the marketing and sale of the assets of Defendant Cruisers. 22. As a result of the material misrepresentations of [t]he Thuro Defendants, Plaintiff suffered such special, general and consequential damages as shall be shown at a trial of this case. WHEREFORE, Plaintiff prays that Judgment be entered in its favor and against Defendants and each of them as follows: 1. For the sum of $84,900.00 being the commission due and owing to Plaintiff. 2. For such special, general and consequential damages as shall be shown at a trial of this case. 3. For punitive damages in a sum not less than $500,000.00. 4. For such other relief to which Plaintiff is entitled pursuant to Rule 54(c) of the Hawaii Rules of Civil Procedure. The document attached to the complaint as Exhibit 1, and described in the complaint as "[a] true and correct copy of

-6-

the Listing Agreement[,]" is a one-page, preprinted form, preprinted on both sides of the page. The document attached as Exhibit 2 to the complaint, and described therein as "[a] true and correct copy of the Amendment[,]" is a one-page, single-sided document. The document attached to the complaint as Exhibit 3 and referred to in the complaint as "[a] true and correct copy of The Listing Agreement[,]"2 consists of six pages -- a five-page form, preprinted on one side of each page, entitled "Offer to Purchase[,]" along with an apparently custom-made, one-page, single-sided document adding to and clarifying the Offer. Defendant Cruisers and the Thuro Defendants filed an answer to the complaint on April 14, 1997. Defendant Cruisers

filed a counterclaim for declaratory judgment at the same time. The answer denied liability and asserted a number of affirmative defenses, among them that Plaintiff had failed "to produce a ready, willing and able buyer whose terms mirrored the offer to sell[.]" costs. The counterclaim prayed for (1) a declaration that the Listing Agreement and Amendment were "void or voidable as a The answer also sought attorneys' fees and

Although the complaint refers to its attached Exhibit 3 as "The Listing Agreement," the context of the paragraph containing the reference and the overall context of the complaint leave no doubt that the reference was erroneous and meant to identify the Offer to Purchase instead. On appeal, Plaintiff consistently describes Exhibit 3 as the Offer to Purchase. -7-

2

matter of law"; or alternatively, (2) a declaration that Plaintiff was in breach of the Listing Agreement and Amendment, an immediate termination of both agreements, and a prohibition against enforcement of any of their provisions. also prayed for attorneys' fees and costs. The July 20, 1996 Listing Agreement, on what appears to be a preprinted form provided by Plaintiff, granted Plaintiff, as "Broker," "the SOLE AND EXCLUSIVE RIGHT to sell, lease, trade, or otherwise dispose of all or any part of the assets" of Defendant Cruisers, as "Seller." The period of exclusivity extended until The sale did not include the The counterclaim

midnight on July 20, 1997.

corporate securities of Defendant Cruisers. Under the Listing Agreement, Defendant Cruisers would pay Plaintiff a commission "in an amount equal to 10% of the PRICE AT WHICH THE Business is actually sold, or a minimum of $12,000 WHICHEVER IS GREATER, immediately upon any one of the following events"; which included, in relevant part: a. BROKER procures a purchaser who is ready, willing, and able to purchase the Business on the proposed terms as set forth above, or as modified by a writing signed by SELLER, but SELLER in any way prevents that purchaser from actually purchasing the Business, whether by withholding from BROKER pertinent lease information, financial reports, tax returns, or other relevant data, or otherwise, or . . . . c. SELLER withdraws the Business from sale or purports to terminate this listing -8-

contract prior to the expiration of the Sole and Exclusive Period, or d. SELLER fails or refuses to complete a sale, lease, trade or other disposition of all or any part of the Business after entering into a written agreement to do so[.] The total purchase price for the assets of Defendant Cruisers under the Listing Agreement was $1,000,000, consisting of a cash down payment of $400,000 ("includes Broker's fee of $100,000") and a new note to Defendant Cruisers secured by the assets, providing for "[s]ixty monthly payments in the amount of $12,748.23 including 10% interest per annum." The Listing Agreement included certain financial numbers concerning Defendant Cruisers that were "provided by the Seller and [were not and will not] be verified by" Plaintiff. One of these was an annual pretax profit figure of $400,000. The Listing Agreement was signed by John Thuro as Vice President of Defendant Cruisers, who was also named therein as the owner of fifty-one percent of the shares of the company. The

Listing Agreement recited that it was entered into by Defendant Cruisers "through Jon Thuro, its officer, director and shareholder[.]" The last paragraph of the Listing Agreement, just above the signature blocks, provided, however, that any signatories, "by signing below, . . . also personally and unconditionally, jointly and severalty (sic) guarantee performance of this

-9-

agreement by any corporation, partnership, or other entity on whose behalf we are acting." Cheryl Thuro did not sign the Listing Agreement. She

is listed in the text of the Listing Agreement as the owner of the remaining forty-nine percent of the shares of Defendant Cruisers. The September 14, 1996 Amendment, signed by Defendant Cruisers, as "Seller," and Plaintiff, as "Broker," read in substance as follows: The undersigned Seller and Broker do hereby amend that certain Listing Agreement for Sole and Exclusive Right to sell executed by and between Seller and Broker dated on: Saturday, July 20, 1996 relating to the sale of the Seller's business known as: MAUI MOUNTAIN CRUISERS, FTF, INC., which was to have expired on Saturday, July 20, 1997, however since books and records have not been delivered to Broker to date, and since false and misleading information was provided to Broker as pertains to company earnings, Seller wishes to extend the expiration date of the listing to September 15, 1997. . . . . IN THE FOLLOWING RESPECTS ONLY: Sales Price changed to $849,000 Terms of the new note changed to total financing of $449,000 @ 7% interest payable in 60 equal monthly installments of $5,213.27. If note is not prepaid, this note will carry total interest proceeds of $127,076.81. The note will have a balloon payment clause payable at the 60th month in the amount of $263,280.56. -10-

The selling price of 849,000 together with earned interest at 60 months, and upon receipt of the balloon payment of $263,280.56 equals = $976,076.81. Down payment is to be $400,000. "Sole and Exclusive Period" as used in Listing Agreement, extended to 12 o'clock midnight on September 15, 1997. ALL OTHER TERMS AND CONDITIONS OF THE LISTING AGREEMENT FOR SOLE AND EXCLUSIVE RIGHT TO SELL REFERRED TO HEREIN ABOVE REMAIN UNCHANGED AND IN FULL FORCE AND EFFECT. Receipt of a copy of this Agreement is hereby acknowledged. (Various forms of emphasis, other than capital letters, omitted). The Amendment was signed by Cheryl Thuro, as President, and Jon Thuro, as Vice President, of Defendant Cruisers. The October 31, 1996 Offer matched in all material respects the price and financing terms of the Listing Agreement and Amendment. The Offer included, however, additional terms not contained in the terms of sale specified in the Listing Agreement and Amendment. The most significant of the variances were listed

by Defendant Cruisers in its counterclaim: a. requiring that [Defendant Cruisers] provide, without compensation, a period of training to Buyer; b. requiring that [Defendant Cruisers], without compensation, not compete for up to five years with Buyer;

-11-

c. leaving open allocations which would affect the net monies to be received by {Defendant Cruisers]; d. making the "offer" contingent upon financial investigation to Buyer's satisfaction, and other unacceptable conditions; and e. requiring a first right of refusal on the business known as "Maui Mountain Caf

Download Business Brokers Hawaii, Inc. v. FTF, Inc..pdf

Hawaii Law