Gayle v Hemlani [2000] GUSC 24; 2000 Guam 25 (8 September 2000)

IN THE SUPREME COURT OF GUAM

ANDREW M. GAYLE,
Plaintiff/Counter-Defendant/Appellee

vs.

P. D. HEMLANI,
Defendant/Counter Claimant/Appellant
______________________

HOWARD TRAPP,
Plaintiff/Counter-Defendant

vs.

P. D. HEMLANI,
Defendant/Counter Claimant-Appellant

Supreme Court Case No. CVA99-047
Superior Court Case Nos. CV0074-98 and 0325-98

OPINION

Filed: September 8, 2000

Cite as: 2000 Guam 25

Appeal from the Superior Court of Guam
Argued and submitted on June 15, 2000
Hagåtña, Guam

Appearing for the Defendant/Counter- claimant/Appellant: Steven A. Zamsky, Esq. ZAMSKY LAW FIRM Suite 501, Bank of Guam Bldg. 111 Chalan Santo Papa Hagåtña, Guam 96910

Appearing for the Plaintiff/Counter- Defendant/Appellee: Duncan G. McCully, Esq. McCULLY & BEGGS, P. C. Suite 200, 139 Murray Blvd. Hagåtña, Guam 96910

BEFORE: BENJAMIN J. F. CRUZ, Chief Justice, PETER C. SIGUENZA, Associate Justice and JOHN A. MANGLONA, Designated Justice.

SIGUENZA, J.:

[1] The Appellant, P.D. Hemlani, appeals an adverse decision of the Superior Court of Guam on a Motion for Summary Judgment by Appellees Andrew M. Gayle and Howard Trapp. We agree with the lower court's disposition of the Appellant's counterclaims of breach of fiduciary duty, constructive fraud and professional negligence, and therefore affirm its decision in the entirety.

I. PROCEDURAL AND FACTUAL BACKGROUND

[2] On June 15, 1971, ABC Company of Guam (hereinafter AABC@) entered into an Option Agreement with Jose L.G. Crisostomo. The Option gave ABC the right to purchase certain real property located in Inarajan, Guam. It was anticipated that Jose L.G. Crisostomo would obtain ownership from the estate of Crisostomo's father, for which he had been appointed administrator. However, Jose L.G. Crisostomo died shortly thereafter, and probate was opened for his estate. (In the Matter of the Estate of Jose Leon Guerrero Crisostomo, Island Court Probate Matter No. 114-71). In December of 1971, the administrator of his estate filed a Petition with the Island Court to order and approve the sale and conveyance of the subject property to ABC. Ostensibly, the court granted the Petition, conditioned upon the closure of Mr. Crisostomo's father's probate.[1]

[3] On January 4, 1972, ABC, as seller, and P.D. Hemlani (hereinafter AHemlani@), as buyer, executed an Option Agreement. In consideration for the payment of $2,000.00, Hemlani was given the exclusive option to purchase the subject property at a higher price than what ABC would have paid in the exercise of its option. The Option Agreement contained the following recital:

7. Representation. The Seller warrants and represents that the grant of this option is contingent upon the Island Court of Guam authorizing the sale of said real property from the estate of Jose Leon Guerrero Crisostomo (Probate Matter 114-71). In the event the Island Court shall fail to authorize the sale the Seller shall refund to the Buyer the full amount of the option payment.

Further, the Option Agreement, by its terms, provided that Hemlani had by February 12, 1972, to exercise the option.

[4] However, on February 10, 1972, ABC and Hemlani executed the first of two extensions of the Option Agreement. In addition to extending the time within which Hemlani could exercise the option to purchase from February 12, 1972 to August 12, 1972, it also was provided that:

ASaid ABC Company does further agree to exercise all diligent and reasonable efforts to assist in the closing of the probate matters which have prevented the said company from now conveying title to the said lots.@

[5] The second extension was executed by the parties on October 12, 1972, and again extended the time for exercise of the option Auntil execution by the administrator of the estate of the agreement of sale@ of the Inarajan property has been made in the estate of Jose Leon Guerrero Crisostomo.

[6] On November 29, 1973, Robert E. Shelton, then-counsel for Hemlani, requested an update of the status of the probate matter and documentation of any and all efforts made to assist in the closing of the matter. It was asserted that Hemlani was ready, willing and able to perform under the terms of the option and extension; and, if the documentation requested was not received, that he would take whatever steps were proper.

[7] In 1974, Hemlani, now represented by attorney Jack A. Rosenzweig, filed suit against ABC Company in the Superior Court of Guam, Civil Case No. CV 0806-74, for the specific performance of the Option Agreement. During the course of discovery, it was learned that Andrew M. Gayle and Howard Trapp (hereinafter AGayle@ and ATrapp@, respectively) were partners in ABC. At all relevant times, both Gayle and Trapp were attorneys licensed to practice in Guam. We further observe that the firm of Trapp & Gayle represented the administrator of the Estate of Jose L.G. Crisostomo.

[8] On February 17, 1978, Hemlani, ABC Company, Gayle and Trapp stipulated to the dismissal, with prejudice, of the suit. As part of the stipulated dismissal, the parties executed a Revised Option Agreement which purported to reaffirm the grant of the option to purchase originally given on January 4, 1972. The Revised Option Agreement provided that Hemlani would have until February 17, 1983, to exercise the option to purchase. The Agreement further affirmed the other terms of the original Option with some modification as to the schedule of payments. The Revised Agreement reiterated the fact that the court had permitted the administrator of the estate of Jose L.G. Crisostomo to execute an agreement to sell the property to ABC but only upon the closing of the estate of Crisostomo's father; and further stated that ABC, Gayle and Trapp, collectively Aseller@, agree to:

[U]ndertake to obtain the closing of the said estate of Joaquin Maria Crisostomo so that the Property will be distributed to the estate of Jose Leon Guerrero Crisostomo and thereafter the Seller shall obtain equitable title thereto by means of an executed and approved contract of sale from the estate of Jose Leon Guerrero Crisostomo, pursuant to the order of the Court. Such efforts shall be at no cost to the Buyer.

[9] On March 4, 1980, a little over two years after the Revised Option Agreement had been executed, Rosenzweig inquired of Gayle and Trapp the status of the estate of Joaquin Maria Crisostomo, and requested a plan of action for resolution of the probate matter. Rosenzweig again communicated to Gayle and Trapp on January 26, 1981, about concerns that the property had a tax lien imposed upon it and of his disappointment that progress had not been made to clear up title on the property because an adverse claimant in the probate case had not been available. Moreover, it was stated that:

I cannot impress too much upon you the fact that my client is coming to the belief that your client (i.e. Messrs. Trapp & Gayle) are merely stringing him along and have no intention of ever clearing up the title to the lots, thus preventing him from exercising the option in a meaningful manner. I have kept Mr. Hemlani at bay by insisting that responsible individuals would not recommit themselves to an option as Howard and Andy did, unless they were confident that they could fulfill the promises that they made regarding title. As time goes on and on and on without there being any discernible progress in clearing up the title difficulties, I lose more and more credibility with my client who is inclined to take the hard-line approach. I have no doubt that the time is getting closer when my client will either recommence litigation or simply take the case from this office and place it in the hands of an attorney who is less patient and amiable than I. I would expect that any subsequent litigation would not be limited to merely a breach of contract claim, but would also raise issues of fraud and bad faith.

[10] The Revised Option Agreement was extended, in writing, on September 13, 1983. It provided that Hemlani would have until July 17, 1985 to exercise the option and that ABC agrees to Acontinue to undertake to obtain the closing of the Estate of Joaquin Maria Crisostomo@.

[11] On November 1, 1985, an Extension to Option Agreement was filed with the Department of Land Management which provided, inter alia, (1) that ABC shall have until January 1, 1987 to undertake the closing of the Estate of Joaquin Maria Crisostomo; (2) that the deadline for Hemlani's exercise of the option is extended to July 17, 1988; and (3) that the instrument dated October 29, 1985, be retroactively effective as of July 17, 1985. All other terms of the various agreements would remain in full force and effect.

[12] On September 6, 1988, Hemlani's new counsel, Jerry E. Hogan, had written to Gayle's attorney requesting an update. In addition, the letter alleged that Hemlani had even paid real property taxes at the request of Gayle. On December 23, 1988, ABC's counsel responded and confirmed that ABC was not delaying the matter to defeat Hemlani's option rights. Another letter was sent by Hogan on December 30, 1988. In that letter, ABC's attorney, by way of acknowledgement dated February 10, 1987, agreed that Hemlani was to have ten days to exercise the option to purchase after ABC Company obtained ownership of the property and notified Hemlani of the same in writing.

[13] Hogan wrote to Gayle on February 9, 1989, and requested Gayle's position on whether Hemlani's option had been forfeited. Additionally, Hogan stated that A