Arashi & Co Inc v Nakashima Enterprises Inc [2005] GUSC 21; 2005 Guam 21 (16 November 2005)

IN THE SUPREME COURT OF GUAM

ARASHI & CO., INC. and HIROYUKI IGARASHI,
Plaintiffs-Appellees,

vs.

NAKASHIMA ENTERPRISES, INC.,
Defendant-Appellant.

Supreme Court Case No.: CVA04-004
Superior Court Case No. CV0334-02

OPINION

Filed: November 16, 2005

Cite as: 2005 Guam 21

Appeal from the Superior Court of Guam
Argued and submitted on March 1, 2005
Hagåtña, Guam

Appearing for the Defendant-Appellant: A. Alexander Gorman, Esq. Timothy M.B. Farrell, Esq. Law Offices of Gorman & Gavras, P.C. 2nd Floor, J & R Bldg. 208 Rte. 4 Hagåtña, Guam 96910

Appearing for the Plaintiffs-Appellees Thomas C. Moody, Esq. Klemm, Blair, Sterling & Johnson, P.C. 1008 Pacific News Bldg. 238 Archbishop Flores St. Hagåtña, Guam 96910

BEFORE: FRANCES M. TYDINGCO-GATEWOOD, Presiding Justice;^[1] F. PHILIP CARBULLIDO, Chief Justice; ROBERT J. TORRES, JR., Associate Justice; JOHN A. MANGLONA, Justice Pro Tempore.

TORRES, J.:

[1] Defendant-Appellant Nakashima Enterprises, Inc. appeals from the trial court’s decision and order, as amended, granting a motion to dismiss Nakashima’s counterclaim and granting summary judgment in favor of Plaintiffs-Appellees Arashi & Co., Inc. and its president, Hiroyuki Igarashi, on a Verified Complaint for Rescission. The trial court held that because Nakashima did not have a business license at the time of the execution of the lease or during the period in which it sought recovery of rent, that Nakashima had no right to maintain the counterclaim or defend against Arashi’s and Igarashi’s complaint for rescission. We affirm in part and reverse in part.

I.

[2] Arashi entered into a Commercial Lease Agreement (the “Lease”) with Nakashima for stall “No. 4” in the food court of a beachside commercial building in Tumon, Guam which was being constructed by Nakashima. The Lease was for a period of three years and was to commence on August 1, 2001; however, if the construction of the building was not completed by then, the commencement date was to be “one (1) month following the date of the completion of the Commercial Building.” Appellant’s Excerpts of Record (“ER”), tab 6, Ex. A (Aff. of Peter J. Sablan in Supp. of Mot. for Summ J., Ex. A, Art. 3 § 3.01). Arashi deposited $10,000.00 to secure the space pursuant to § 5.06 of the Lease^[2] and paid the first month’s rent of $1,700.00 plus $150.00 in monthly common area fees. A “Guarantee of Lease” made by Arashi in favor of Nakashima was also executed by Igarashi (“Igarashi”) as President of Arashi, unconditionally guaranteeing the payment of rent and performance of all the obligations under the Lease.

[3] The building was not ready for occupancy on August 1 because of construction delays, and by December 2001, the building was still not completed. Nakashima claims that he informed Arashi in December that Nakashima would deliver possession of the premises in January 2002; nonetheless, in a letter dated December 27, 2001, Arashi made a written demand for rescission of the Lease. Nakashima did not recognize Arashi’s attempted rescission and the certificate of occupancy for the building was finally issued on January 11, 2002.

[4] In March 2002, Arashi and Igarashi filed suit against Nakashima for rescission of the Lease, cancellation of the guarantee, and return of the monies paid. In response, Nakashima counterclaimed for breach of the Lease alleging Igarashi was personally obligated under the guarantee, and demanding lease payments for the three years that the lease was to have been in effect.^[3] Arashi’s reply to the counterclaim raised numerous affirmative defenses but did not include the affirmative defense that Nakashima lacked a business license.

[5] On October 7, 2002, Arashi filed a Notice of Motion and Motion for Summary Judgment on the grounds “that there exist[s] no genuine issue of material fact and [that] Arashi [and Igarashi were] entitled to judgment as a matter of law. Appellant’s ER tab 4, p. 2 (Notice of Mot. and Mot. for Summ. J.). While the summary judgment motion referenced a contemporaneously filed affidavit and memorandum of points and authorities in support of the motion, these additional documents were not filed until August 2003, and the motion as filed offered no explanation as to why summary judgment was appropriate. The later filed memorandum made clear, however, that Arashi was moving for summary judgment on the rescission of the Lease and cancellation of the guarantee and dismissal of all of the counterclaims on the grounds that (1) summary dismissal of Nakashima’s counterclaim was required because Nakashima did not have a business license at the time it executed the Lease or when it sought remedies in the Superior Court; (2) rescission was appropriate given the five-month delay in delivering possession of the leased premises; and (3) Igarashi did not become personally liable as a result of signing the guarantee on behalf of Arashi. Nakashima opposed the summary judgment motion, asserting that Arashi had waived the business license issue when it failed to plead it as an affirmative defense in its reply and that Nakashima had substantially complied with the business license law. Nakashima further argued summary judgment on the rescission claim was not appropriate because the parties contemplated the commencement date could be delayed, the Lease specifically contained language to that effect, and whether the delay in the commencement date was unreasonable is a question of fact precluding summary judgment.

[6] After oral argument the trial court, in a Disision yan Otden