Kreitman v. Day

1

JAMES KREITMAN, Plaintiff-Appellee, v. JAMES MILTON DAY, JR. and JENNIFER ELLEN DEMOSS DAY,Defendants-Appellants, and JOHN DOES 1-100; JANE DOES 1-100; DOE PARTNERSHIPS 1-100; and DOE CORPORATIONS 1-100, Defendants

No. CAAP-17-0000549

Intermediate Court of Appeals of Hawaii

May 19, 2023

NOT FOR PUBLICATION IN WEST'S HAWAI'I REPORTS AND PACIFIC REPORTER

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT (CASE NO 3CC15100253K)

On the briefs: Paul Alston, Kristin L. Holland, for Defendants-Appellants James Milton Day, Jr. and Jennifer Ellen Demoss Day.

Lisa Strandtman, for Plaintiff-Appellee James Kreitman.

(By Ginoza, Chief Judge, Hiraoka and Nakasone, JJ.)

MEMORANDUM OPINION

Defendants-Appellants James Milton Day, Jr. and Jennifer Ellen DeMoss Day (collectively, the Days) appeal from the Judgment in favor of Plaintiff-Appellee James Kreitman entered on June 16 2017.^[1] For the reasons explained below, we vacate the Judgment in part and remand for further proceedings.

This case is about the Days' alleged failure to disclose a leaking water line on real property on Hawai'i island (the Property) they sold to Kreitman.^[2] The Days listed the Property for sale in September 2012. The listing price was $3.7 million. They signed a "Seller's Real Property Disclosure Statement" on January 30, 2013. The Disclosure Statement did not mention water leaks or excessive water usage.

During February 2013, a home inspection was conducted for potential buyers of the Property. The inspector's written report (the Woodbury Inspection Report) stated:

Plumbing:

1) The water shut off valve is located near the garage in a recessed box. The valve and pressure regulator here are partially buried in the soil, and the valve handle is quite corroded. Remove some of the soil and replace the valve handle.

2) There [sic] disclosure of apparent leakage in the plumbing system, as bills are apparently high. The caretaker present during my inspection related a leak detection specialist was engaged to solve this problem, but did not. Have a licensed plumber test for any leakage in the water supply system.

The potential buyers did not purchase the Property.

The Property was on the market for over a year. On December 30, 2013, Kreitman offered to buy the Property, subject to various contingencies. The next day, the Days' realtor asked them if she should provide Kreitman with the Woodbury Inspection Report. The Days responded by email: "Hold on to the Woodbury Inspection Report. Do not forward it to the buyer. The buyer may request an inspection and we can address items on his inspection report when we see what the inspector comes up with." The Days then accepted Kreitman's offer. The Purchase Contract was signed on December 31, 2013. The purchase price was $2.7 million.

On January 3, 2014, Jennifer Day signed an Amendment to the Disclosure Statement. The Amendment stated:

19. Water Line: In preparing the property for sale, the sellers observed that the water bills showed abnormally high consumption and contracted with Kona Labs to perform a leak detection on the irrigation and main water supply lines into the house. The initial test performed was an air test and it disclosed line leakage. The irrigation lines were isolated from the main water lines and retested with air and leakage was found around several valves. The valves were repaired and retesting showed the repairs to be tight. The main water lines were tested with helium and were determined to be leaking in several places. Three large water leaks were discovered and repaired where the water line crossed the gas line and there is one leak that is in the process of being repaired.

26. Pool: In getting the property ready for sale, the sellers contracted with Big Island Leak Detection to test the pool for leakage. A small 30-gallon per day leak was detected. Pacific Blue H20 has been contracted to make the repairs in early January 2014 using a high-pressure epoxy injection to permanently seal the hairline cracks.

Additional: The filter in the koi pond is currently malfunctioning, and is in the process of being repaired or replaced. Work to be completed prior to closing.

Kreitman had the Property inspected on January 6, 2014. On January 11, 2014, the Days and Kreitman signed Addendum #1 to the Purchase Contract. Kreitman received a $10,000 plaster credit for the pool, and the Days were required to complete repair work to the pool and koi pond before closing. The transaction closed and title to the Property was conveyed to Kreitman on February 7, 2014.

About three months later, Kreitman received a water bill showing the Property using over 5,000 gallons of water per day. At that time, the Property was unoccupied but was being maintained by a landscaper (Lindsey Swan-Lindsey) who had previously worked for the Days. At Swan-Lindsey's suggestion, Kreitman contacted Stephen Edmonds, an irrigation and landscaping contractor. Edmonds found and repaired a leak in the water line under the front lawn. He determined that there were no other leaks in the water line going away from the house.

Kreitman then contacted Ron Miller, the contractor who had installed the original plumbing on the Property. Miller took Gary Taylor, a plumber, to the Property. Taylor determined there were leaks somewhere outside the house. He recommended replacing the water line. Kreitman had the line replaced. But water leaks persisted.

Adam Broderson, a landscaper, went to the Property. He shut off the backflow preventer on the water line coming into the house. He determined there was a leak somewhere between the backflow preventer and the Hawai'i county water meter. Broderson replaced and re-routed that portion of the water line. After the work was completed the water bill for the Property - then occupied - averaged 700 gallons per day.

Kreitman filed the action below on June 29, 2015. The complaint alleged breach of contract, breach of implied covenant of good faith and fair dealing, violation of Hawaii Revised Statutes (HRS) Chapter 508D (Mandatory Seller Disclosures in Real Estate Transactions), and intentional and negligent misrepresentation.

The Days moved to dismiss the complaint. The circuit court denied the motion. A jury-waived trial was held on January 17 and 18, 2017. The parties submitted amended stipulated findings of fact on January 27, 2017. The court entered findings of fact, conclusions of law, and an order on April 3, 2017 (Findings, Conclusions, and Order). The court found in favor of Kreitman and against the Days, awarded damages in the lump sum of $37,337.40, and awarded Kreitman attorneys' fees in an amount to be determined. The Judgment, entered on June 16, 2017, awarded Kreitman an additional $39,334.35 in attorneys' fees and $4,868.37 in costs.^[3]

This appeal followed. The Days raise six points of error, which we've consolidated for discussion purposes: (1) findings of fact (FOF) nos. 68, 70, and 76 were clearly erroneous; (2) conclusions of law (COL) nos. 4, 5, 6, 7, 8, 9, 10, and 11 were wrong;^[4] (3) the circuit court erred in its award and calculation of damages; and (4) the circuit court erred in its award and calculation of Kreitman's attorneys' fees.

1. FOF nos. 68, 70, and 76 were not clearly erroneous.

We review findings of fact under the "clearly erroneous" standard. Est. of Klink ex rel. Klink v. State, 113 Hawaii 332, 351, 152 P.3d 504, 523 (2007). A finding of fact is clearly erroneous when the record lacks substantial evidence to support the finding or when, despite substantial evidence to support the finding, we are left with a definite and firm conviction that a mistake has been committed. Id. "Substantial evidence" is "credible evidence which is of sufficient quality and probative value to enable a person of reasonable caution to support a conclusion." Id. (citations omitted).

The circuit court found:

68. Steve Edmonds told Lindsey Swan-Lindsey that from his inspection of the subject property and judging from the rate at which the water meter was spinning, that there were additional, substantial leaks that needed to be fixed. He further stated that concrete in portions of the subject property would probably need to be removed and the majority of the water lines would need to be replaced in order to remedy the leaks. Lindsey Swan-Lindsey reiterated this to the [Days] via a telephone call to Mr. James Day. Ex. TT, at 28. See also Ex. RR; First Am. Stip. FOF, at ¶¶ 30-31; Trial Test. of Lindsey Swan-Lindsey.

Exhibit TT is the transcript of Edmonds' deposition, portions of which were admitted into evidence by stipulation. Edmonds testified:

Q Do you recall telling Mrs. Lindsey that judging from the rate at which the meter was spinning, there were additional and substantial leaks that needed to be fixed?

A Yes.

Q Do you also recall telling her that concrete portions of the subject property would probably need to be removed, and the majority of the waterlines would need to be replaced in order to remedy the leaks?

A I believe we had that conversation, yes. The installer of the original waterline placed it far under a sidewalk, so it was impossible to get to.

Edmonds did not say when that conversation took place. The stipulated findings of fact state:

30. Mrs. Lindsey claims that Mr. Day told her that they had spent enough money trying to fix the water leaks and they were not going to spend any more.

31. The Days deny receiving such a telephone call from Mrs. Lindsey.

During trial Swan-Lindsey testified that she worked for the Days when they owned the Property. They asked her to investigate the water bill because it was "high." Swan-Lindsey asked "our irrigation guy" Edmonds to look for leaks on the two-acre Property. There was nothing obvious, so she hired...