Plaintiff-Appellant Emerson M.F. Jou, M.D. (Jou) appeals from "Defendant K. Kenneth Siu's Second Judgment Against Plaintiff Emerson M.F. Jou, M.D.," entered on February 3, 2012 in the Circuit Court of the First Circuit
On November 25, 2009, Jou filed a complaint (Complaint) against Siu, alleging Siu had made false representations and had induced Jou into entering into an agreement to lease a dwelling unit to Siu. On April 21, 2010, Siu filed a motion to dismiss the Complaint and for attorney's fees pursuant to Hawaii Revised Statutes (HRS) § 607-14 (Supp. 2012).
On June 15, 2010, Jou filed an opposition to Siu's motion to dismiss. On the same day, Jou filed a first amended complaint (FAC) purporting to assert a cause of action based on Siu's false representations, plus claims for conversion, negligence, and violations of HRS § 663-1 (Supp. 2012).
On July 19, 2010, the parties participated in a settlement conference and placed a conditional settlement on the record. The settlement was contingent upon Siu's provision of certain financial disclosure statements (specifically, the asset and debt statements and income and expense statements Siu had filed in the Family Court of the First Circuit (Family Court)). Siu would then pay two thousand dollars to Jou in exchange for a release and indemnification, and the parties would stipulate to a dismissal of Jou's Complaint.
On July 30, 2010, Jou filed a motion to set aside the settlement and for attorney's fees and costs. Jou contended the settlement should be set aside because Siu had failed to provide his asset and debt statements and had concealed assets. The circuit court held a hearing on the motion on August 3, 2010. At the hearing, the circuit court set aside the contingent settlement agreement and dismissed Jou's FAC, noting the FAC failed to correct deficiencies in the original Complaint.
Jou filed a motion for reconsideration on August 11, 2010, which the circuit court granted in part. The court reconsidered its dismissal of the FAC because Siu had filed a motion to dismiss the original Complaint but not the FAC. On December 23, 2010, the circuit court entered an order dismissing the Complaint for lack of jurisdiction and for failure to state a claim, and the court awarded attorney's fees to Siu.
On January 6, 2011, Jou filed a motion for leave to file a second amended complaint (SAC). On September 8, 2011, the circuit court decided the motion in part, permitting Jou to assert a single claim for breach of the lease agreement. The court denied the remaining claims (discussed below) as being futile.
Jou filed his SAC on September 27, 2011. On October 19, 2011, Siu moved to dismiss the SAC pursuant to Hawai`i Rules of Civil Procedure (HRCP) Rule 12(b)(1) and 12(b)(6). On November 10, 2011, Jou filed a motion for summary judgment, partial summary judgment, or an HRCP 56(d) order (November 10, 2011 MSJ). At the hearing on both parties' motions, held on December 7, 2011, the circuit court granted Siu's motion for dismissal, concluding the SAC was not well-pled and failed to state a cognizable claim. The court also concluded it lacked subject matter jurisdiction because the SAC failed to establish that Jou's claim for damages exceeded the minimum jurisdictional amount pursuant to HRS § 604-5 (Supp. 2012).
On February 3, 2012, the circuit court entered "Defendant K. Kenneth Siu's Second Judgment Against Plaintiff Emerson M.F. Jou, M.D.," entering final judgment in favor of Siu and against Jou and dismissing all claims in Jou's Complaint, FAC, and SAC. Jou filed a timely notice of appeal on February 27, 2012.
Jou raises several points on appeal, generally contending the circuit court erred in:
(1) dismissing Jou's original Complaint and awarding attorney's fees to Siu;
(2) denying in part Jou's motion for leave to file his SAC;
(3) dismissing the SAC and awarding attorney's fees to Siu; and
(4) denying Jou's November 10, 2011 MSJ on the SAC.
"[T]he grant or denial of leave to amend under [HRCP] Rule 15(a) is within the discretion of the trial court."
"The trial court's grant or denial of attorney's fees and costs is reviewed under the abuse of discretion standard."
We agree with Jou's contention that the circuit court erred in dismissing his original Complaint and in granting Siu's April 21, 2010 request for attorney's fees under HRS § 607-14.
Jou contends the circuit court erred in denying Jou's request to state seven tort claims in his SAC. In his proposed SAC, Jou sought to assert a claim for "fraudulent inducement of lease;" three claims for fraud based on Siu's alleged wrongful subletting, retention of subtenant deposits, and payment through a check drawn on insufficient funds; and claims for conversion, negligence, and violations of HRS § 663-1.
HRCP Rule 15(a), which governed Jou's request to amend his Complaint, states: "[A] party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires." A court may deny a motion for leave to amend a pleading if the amendment appears futile.
Siu's motion opposing Jou's motion for leave to amend argued Jou's additional claims were futile pursuant to HRS § 663-1.2 (Supp. 2012). HRS § 663-1.2 states: "No person may recover damages, including punitive damages, in tort for a breach of a contract in the absence of conduct that: (1) Violated a duty that is independently recognized by principles of tort law; and (2) Transcended the breach of the contract." Thus, as a general rule, a breach of contract does not give rise to a tort action.
Fraud and fraudulent inducement, however, are contract-related torts for which tort recovery may be available. In
HRCP Rule 9(b) provides: "In all averments of fraud . . . the circumstances constituting fraud or mistake shall be stated with particularity." "The rule is designed, in part, to insure the particularized information necessary for a defendant to prepare an effective defense to a claim which embraces a wide variety of potential conduct."
The original Complaint and the FAC contained conclusory allegations that Siu had made false representations, intending to induce Jou into leasing a dwelling unit and did not expressly allege fraud. Therefore, the Complaint and FAC failed to give Siu fair notice of a fraud claim with sufficient particularity to satisfy the requirements of HRCP Rule 9(b).
The above allegations are distinct from those giving rise to Jou's breach of contract claim and are stated with sufficient particularity under the standards of HRCP Rule 9(b). Furthermore, Jou may pursue multiple or alternative remedies during the course of trial (although, to the extent Jou's damages were the same for his fraudulent inducement and breach of contract claims, he cannot recover on both theories).
The circuit court did not err, however, when it concluded Jou's fraud claims for "fraudulent subletting," "fraud-retention of subtenant deposit," and "fraud-check drawn on insufficient funds" were futile. "Fraud cannot be predicated on statements which are promissory in their nature, or constitute expressions of intention, and an actionable representation cannot consist of mere broken promises[.]"
Jou based the three fraud claims solely on allegations of Siu's promises to perform future acts. The "fraudulent subletting" and "fraud-retention of subtenant deposit" claims were based on Siu's promise to sublet the unit, pass all rent from the subtenants to Jou, and refund the subtenants' deposits. The claim for "fraud-check drawn on insufficient funds" was based on Siu's promise to "send[] a check for a payment of the November 2008[] rent owed to [Jou]." Because the three causes of action were based solely on Siu's alleged failure to perform promised future acts, the circuit court did not err when it concluded the proposed amendments failed to state a claim for fraud.
The circuit court also did not err when it concluded that Jou's claims for conversion, negligence, and violations of HRS § 663-1 were futile. The three claims were predicated on the same set of facts as Jou's contract claim for breach of the lease agreement, and the SAC failed to allege a breach of any duty separate and distinct from Siu's contractual obligations under the lease agreement. Pursuant to HRS § 663-1.2, Jou's remedy for these allegations lie solely in his action on the contract, and the circuit court properly denied these claims as futile.
The circuit court dismissed the SAC for failure to state a claim for breach of contract, concluding the SAC was not well-pled and was ambiguous. We disagree and conclude the circuit court erred in dismissing the SAC.
HRCP Rule 8(a)(1) sets for the requirements for pleading a claim and calls for "a short and plain statement of the claim showing that the pleader is entitled to relief[.]" We conclude the SAC satisfied this standard. The SAC stated, in relevant part:
Such allegations suffice to put the defendant on notice as to the nature of Jou's claim for breach of the lease contract and, taking the allegations as true and in the light most favorable to the plaintiff,
The circuit court also erred to the extent it dismissed the SAC for lack of subject-matter jurisdiction. At the hearing on Siu's motion to dismiss the SAC, the circuit court concluded it lacked jurisdiction because the SAC failed to establish that Jou's claim for damages exceeded the minimum jurisdictional amount for civil jurisdiction in the circuit court, pursuant to HRS § 604-5. Pursuant to HRS § 604-5, the district courts have exclusive jurisdiction in civil actions in which the amount in controversy does not exceed $10,000, and the district courts and circuit courts have concurrent jurisdiction when the amount in controversy exceeds $10,000 but does not exceed $25,000. Here, the SAC expressly requested damages in excess of $10,000. Because we must deem these allegations to be true, we conclude the SAC was within the concurrent jurisdiction of the circuit courts and the district courts and not within the exclusive jurisdiction of the district courts.
Therefore, the circuit court erred in dismissing the SAC for failure to state a claim and for lack of subject-matter jurisdiction. Because the dismissal was erroneous, the court also erred in granting Siu's request for attorney's fees pursuant to HRS § 607-14.
Jou contends he is entitled to summary judgment on his SAC. Jou relies on the asset and debt statements Siu had filed in the Family Court, in which Siu noted a debt for $12,125.41 owed to Jou. Jou argues the statements should be deemed an admission by Siu.
The record, however, contains conflicting evidence sufficient to preclude summary judgment. The entry for the $12,125.41 debt to Jou referred to a document attached to the asset and debt statements. The document stated Siu "
We vacate the February 3, 2012 "Defendant K. Kenneth Siu's Second Judgment Against Plaintiff Emerson M.F. Jou, M.D." entered in the Circuit Court of the First Circuit and remand this case for further proceedings.
HRS § 604-5(a) (emphasis added).
