Calipjo v. Purdy. , 439 P.3d 218 ( 2019 )

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Electronically Filed
Supreme Court
SCWC-XX-XXXXXXX
23-APR-2019
IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
10:28 AM
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________________________________________________________________
ELESTHER CALIPJO,
Petitioner/Plaintiff-Appellee,
vs.
JACK PURDY, REGAL CAPITAL CORPORATION,
REGAL CAPITAL COMPANY, LLC,
Respondents/Defendants-Appellants.
________________________________________________________________
SCWC-XX-XXXXXXX
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-XX-XXXXXXX; CIVIL NO. 04-1-0003)
APRIL 23, 2019
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY WILSON, J.
I. INTRODUCTION
We consider only one issue from the application for
writ of certiorari filed by Petitioner Elesther Calipjo
(“Calipjo”): whether there was no evidence to support the
jury’s verdict that (1) Respondent Jack Purdy (“Purdy”) was the
alter ego of Respondents Regal Capital Corporation (“Regal
Corp.”) and Regal Capital Company, LLC (“Regal LLC”)
(collectively, “Respondents”), (2) Regal Corp. breached the
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contracts it entered into with Calipjo, and (3) Regal LLC
committed unfair and deceptive acts or practices.
In a jury trial before the Circuit Court of the Fifth
Circuit1 (“circuit court”), the jury found that Regal Corp.
violated the agreements of sale for two parcels of land on the
island of Kauaʻi and breached the covenant of good faith and fair
dealing implied in the agreements. The jury determined that
Regal Corp. and Regal LLC committed unfair and deceptive acts or
practices in their dealings with Calipjo. Furthermore, the jury
concluded that Purdy was the alter ego of Regal Corp. and Regal
LLC. Based on the alter ego finding, the jury determined that
Purdy, too, violated the agreements of sale for the two
properties, breached the covenant of good faith and fair dealing
implied in the agreements, and committed unfair and deceptive
acts or practices.
We hold that there was evidence to support the jury’s
verdict that Regal Corp. violated the terms of the agreements,
Regal LLC engaged in unfair and deceptive acts or practices, and
Purdy was the alter ego of Regal Corp. and Regal LLC.
Therefore, the Intermediate Court of Appeals (“ICA”) erred when
it found that no evidence was introduced at trial to support
these findings. Calipjo v. Purdy, No. CAAP-XX-XXXXXXX, 2017 WL
1The Honorable Randal Valenciano presided over the trial.
2
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6547461, at *4-*7 (App. Dec. 22, 2017) (SDO). Additionally, the
ICA erred when it reversed the circuit court’s final judgment
against Purdy on the breach of contract, breach of the implied
covenant of good faith and fair dealing, and unfair and
deceptive acts or practices claims.2 We affirm in part and
vacate in part the ICA’s January 24, 2018 Judgment on Appeal and
reinstate the circuit court’s July 18, 2014 final judgment.
II. BACKGROUND
On or around August 12, 2002, Calipjo entered into two
Deposit Receipt Offer and Acceptance (“DROA”) contracts with
Regal Corp. for the purchase of two lots owned by Regal Corp. on
the island of Kauaʻi: Unit E of the Moana Ranch Estates (“Moana
property”) and Unit A of the Aliʻi Ranch Estates (“Aliʻi
property”). At the time, Purdy was the sole owner and operator
of Regal Corp. The DROAs governed the sale of the Moana
property for $175,000.00 and the Aliʻi property for $280,000.00.
The Moana and Aliʻi property DROAs contained different
“special terms” located in condition C-67 of each contract. On
the one hand, condition C-67 of the Moana property DROA provided
that Calipjo’s purchase of the Moana property was contingent on
2
The ICA reversed the judgment against Purdy for breach of
contract (Counts 3 and 4), breach of the covenant of good faith and fair
dealing (Count 11), and unfair and deceptive acts or practices (Count 10).
Calipjo, 2017 WL 6547461, at *7.
3
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his purchase of the Aliʻi property.3 On the other hand,
condition C-674 of the Aliʻi property DROA gave Calipjo an option
to purchase the Aliʻi property once the Real Estate Commission of
the Department of Commerce and Consumer Affairs of the State of
Hawaiʻi (“Commission”) issued a Final Condominium Public Report
for the properties.5 Condition C-67 of the Aliʻi property DROA
also gave Calipjo the option to terminate the Aliʻi property DROA
by giving written notice to Regal Corp. at any time prior to the
issuance of the Final Condominium Public Report.6 When Calipjo
3
Condition C-67 of the Moana property DROA provided that the
purchase of the Moana property was “[c]ontingent upon Buyer’s purchase and
successful close of escrow for Unit A of Alii Ranch Estates I[.]”
4
Condition C-67 of the Aliʻi property DROA stated:
1) This DROA shall constitute a reservation and not
an obligation to purchase or sell subject property. Buyer
may terminate this reservation at any time prior to it
becoming a binding contract by written notice to Seller.
2) Seller to provide to Buyer a copy of the Final Public
Report upon completion of [Condominium Property Regime
(“CPR”)]. Buyer shall have 15 days to examine said Report
and rescind this reservation by written notice to Seller.
At expiration of stated examination period this DROA shall
become a binding contract. 3) All contingency dates stated
in this DROA shall be based on the date that this offer
becomes a binding contract. 4) This offer is contingent
upon Seller’s acceptance of Buyer’s offer to purchase TMK
4-4-2-22-30-A.
5
Under the version of the Condominium Property Act effective at
the time that Calipjo entered into the DROAs, the owner of a parcel that
currently has condominiums or is zoned to have condominiums must notify the
Commission of its intent to sell the property and submit a Final Condominium
Public Report disclosing all material facts regarding the development.
Hawaiʻi Revised Statutes (“HRS”) §§ 514A-31, -36 (Supp. 2002).
6
The Aliʻi property DROA provided, in pertinent part, “Buyer may
terminate this reservation at any time prior to it becoming a binding
contract by written notice to Seller.”
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signed the DROAs, Regal Corp. did not possess an option to
terminate the Aliʻi property DROA.
Shortly thereafter, Regal Corp.’s real estate agent,
Tom Summers (“Summers”), provided copies of the Aliʻi and Moana
property DROAs to Purdy for review. At trial, Purdy testified
that he thought it was unfair that condition C-67 in the Aliʻi
property DROA only gave Calipjo, the buyer, the option to
terminate the agreement. He testified that “[i]f the buyer had
a right to terminate, then I should have that same right.”
Purdy instructed Summers to add the phrase “or Seller” to
condition C-67 of the Aliʻi property DROA.7 Thereafter,
condition C-67 read: “This DROA shall constitute a reservation,
and not an obligation to purchase or sell subject property.
Buyer or Seller may terminate this reservation at any time prior
to it becoming a binding contract by written notice to Seller.”
(Emphasis added.) Because the purchase of the Moana property
was contingent on the purchase of the Aliʻi property, this
addendum effectively gave the buyer or the seller the authority
to terminate both DROAs at will—although the seller was not
required to notify the buyer of its intent to cancel.
7
Summers and Purdy dispute who handwrote “or Seller” above
condition C-67. Summers claims that Purdy wrote the term in, while Purdy
claims that his office merely directed Summers to add the term.
5
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Summers informed Calipjo that he needed to come to
Summers’ office to initial and backdate the addendum to the Aliʻi
property DROA that added the language in condition C-67 giving
the seller the authority to terminate the DROAs for the Aliʻi and
Moana properties without notice to the buyer.8 While at Summers’
office, Calipjo asked Summers if the alteration would change his
position because he was unsure whether “or Seller” referred to
himself or Regal Corp.9 According to Calipjo, Summers replied,
“No. I just — this is just a mere technicality with the CPR
laws that they’re doing.” Summers later testified that he told
Calipjo that the addition of “or Seller” was Purdy’s
counteroffer “and if [Calipjo] didn’t want to acknowledge this,
then he wouldn’t have a reservation agreement.” Relying on
Summers’ representations about the alteration, and with no prior
experience with CPRs,10 Calipjo initialed the addendum to the
Aliʻi property DROA and backdated his signature to August 12,
2002 per Summers’ request. Neither Summers nor Calipjo
8
Calipjo and Summers dispute the exact date upon which Calipjo
returned to sign and backdate the addendum. Calipjo asserts that he signed
the addendum the day after he originally signed the DROAs, on August 13,
2002. Summers claims that Calipjo returned on September 4, 2002 to sign and
backdate the addendum.
9
Calipjo asked, “Will this change my position because you are the
seller or buyer?”
10
Under the Condominium Property Act, a CPR governs ownership of
condominiums or “single units, with common elements, located on property
within the [CPR].” HRS § 514A-3 (1993).
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testified that Calipjo received consideration for agreeing to
the addendum. Upon signing and backdating the alteration,
Calipjo deposited $5,000.00 per property into escrow, totaling
$10,000.00.
Over the course of the next few months, while awaiting
the Final Condominium Public Report, Calipjo met with several
interested buyers for the Aliʻi and Moana properties. On October
30, 2002, Calipjo agreed to sell the Aliʻi property to a buyer
for $375,000.00. The closing date was set for sixty days after
Calipjo received the Final Condominium Public Report. Then, on
April 14, 2003, Calipjo entered into a contract with Francis
Green for the sale of the Moana property for $550,000.00.
Meanwhile, Purdy realized that the properties could be
used for a lucrative high-end development. At trial he
testified that after signing the DROAs, he gained “a learning
and understanding of the property. And as time went on, it was
sort of solidifying in [his] mind to do something better with
the property.” Statements made during his deposition further
explained this realization:
Our Realtor, Tom Summers[,] rehearsed the law. And
the law was changing in terms of their ability to use an
agricultural condominium for other than livestock and
farming purposes. So we got the idea of putting rocks,
gates at the entrance at each one of the lots, divided in
the best few quarters to protect the few quarters of all
lots, putting some common amenities on a common area on one
of the lots, putting wood fences, plank fences, painted all
the way around, making it really quite an exclusive
property, which is far different than what we earlier
started.
7
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At the time, Purdy was not only the sole owner of Regal Corp.,
but also the sole member and manager of Regal LLC, a Hawaiʻi
limited liability company. On April 30, 2003, approximately
eight months after entering into the DROAs, Regal Corp.
transferred its interest in the Aliʻi property to Regal LLC.
Likewise, on November 7, 2003, Regal Corp. assigned its interest
in the Moana property to Regal LLC.
Regal Corp. was not paid for these properties. Purdy
testified that although the properties were worth over 1.7
million dollars at the time of transfer, Regal LLC received them
for free—no cash transfer or consideration was conveyed from
Regal LLC to Regal Corp. At trial, Purdy referred to this
transfer as a “book entry” and said that it was “pretty
commonplace.” He did not explain how Regal Corp. received value
from the transfer.
On August 7, 2003, Calipjo received a letter from
Purdy on behalf of Regal Corp. notifying Calipjo that Regal
Corp. was exercising its right to cancel the Aliʻi property DROA.
Because the sale of the Moana property was contingent on the
sale of the Aliʻi property,11 and Regal Corp. was no longer
selling the Aliʻi property, this letter effectively cancelled
11
Pursuant to condition C-67 of the Moana property DROA. See supra
note 3, at 4.
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both DROAs. In the letter, Purdy explained that “[d]ue to the
recent change in the law affecting the uses of agricultural
property and the substantial increases in the real estate market
over the past few months,” Regal Corp. was exercising its right
to cancel the Aliʻi property DROA pursuant to condition C-67.
Regal Corp. sent Calipjo notices of cancellation and refunded
the $10,000.00 that Calipjo tendered into escrow. Calipjo
refused to execute the escrow cancellation forms and sent the
checks back to escrow.
A. Circuit Court Proceedings
Calipjo brought suit against Respondents Regal Corp.,
Regal LLC, and Purdy seeking specific performance of the DROAs
and money damages. In his first amended complaint, Calipjo
asserted, inter alia, two claims of breach of contract, one
claim of breach of the covenant of good faith and fair dealing,
and one claim for unfair and deceptive acts or practices. He
also claimed Purdy was the alter ego of Regal Corp. and Regal
LLC.
1. Calipjo’s Arguments
In support of his breach of contract claims, Calipjo
argued at trial that Regal Corp. violated the express terms of
the DROAs by transferring the Aliʻi property to Regal LLC before
cancelling the DROAs. He noted that, at the time the DROAs were
originally entered into, Calipjo had an absolute right to
9
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purchase the properties. This right was altered, he claimed,
when Respondents required Calipjo to sign the addendum to
condition C-67 of the Aliʻi property DROA which gave Regal Corp.
the option to terminate the DROA without notice to Calipjo at
any time before issuance of the Final Condominium Public Report.
Calipjo noted that Respondents altered condition C-67 of the
Aliʻi property DROA with the intent to cancel the DROAs after
using Calipjo’s offer to attract financing. Because Regal Corp.
transferred the Aliʻi property before cancelling the DROAs,
Calipjo claimed, Regal Corp. breached the DROAs.
Next, Calipjo argued that Respondents committed unfair
and deceptive acts or practices. He alleged that Regal Corp.,
Regal LLC, and Purdy carried out a fraudulent scheme to entice
Calipjo into entering the DROAs, then cancel the DROAs once the
development attracted greater financing.12
In addition, Calipjo argued that Purdy should be
liable for the actions of Regal Corp. and Regal LLC as the alter
ego of both companies. He raised three main issues to support
his alter ego theory of liability. First, Calipjo identified
Purdy as the sole shareholder, director, and officer of Regal
Corp. and the sole member and manager of Regal LLC. Calipjo
12
Calipjo testified that he saw a sign posted on the property
grounds soliciting the sale of the Aliʻi and Moana properties.
10
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argued that sole ownership and control is one of many factors
that can establish alter ego and, therefore, evidence of Purdy’s
ownership and control was pertinent to this claim.
Second, Calipjo claimed that Purdy used Regal Corp.
and Regal LLC to perpetuate a fraud because he never intended to
sell the properties, but rather, intended to develop the parcel
himself and needed to attract financing for the project.
According to Calipjo, Purdy’s intent was to cancel the Aliʻi
property DROA after using it to obtain financing for Purdy’s
development of the property for his own benefit. To facilitate
his eventual cancellation of the Aliʻi property DROA, Purdy
included in the contract the option permitting him, as the
seller, to terminate the agreement.
Calipjo alleged that the Aliʻi and Moana property DROAs
helped Purdy successfully obtain financing for his intended
development because the completed DROAs showed that Purdy had
interested buyers:
You know what he did with that contract? He showed
it to people to get them more money. He’s got contracts
for preselling already. Banks love that stuff. He showed
it to other people; oh, yeah, I got this property, it’s got
to be subdivided, I already got contracts already. It
builds and it builds on itself because he’s having trouble.
Calipjo contended that Purdy’s intent to renege on the Aliʻi
property DROA became evident once he secured alternative
financing because, at that time, Purdy cancelled the DROAs.
Once the financing was secured for Purdy’s intended development,
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Purdy cancelled the Aliʻi property DROA, which inherently
cancelled the Moana property DROA, and thus perpetuated a fraud
through Regal Corp. and Regal LLC. To support this claim,
Calipjo testified that seven years after the parties entered
into the DROAs, Purdy approached Calipjo outside the Kauaʻi
courthouse and said “[h]e [didn’t] intend to sell [Calipjo] the
property in the first place anyway.” Although Purdy denied
making this statement, another witness corroborated Calipjo’s
testimony.
Third, Calipjo raised an issue regarding
undercapitalization. Based on Purdy’s testimony, Calipjo
contended that Purdy transferred approximately 1.2 million
dollars13 worth of real estate from Regal Corp. to Regal LLC “for
nothing, zero.” Calipjo alleged that because no money was paid
to Regal Corp., this transfer left Regal Corp. severely
undercapitalized. Therefore, he argued, Regal Corp. and Regal
LLC failed to function as legitimate businesses and, instead,
functioned as mere pretenses for Purdy’s personal dealings. At
the close of Calipjo’s case, Respondents orally moved for
13
There is no record of the value of the properties at the time of
transfer and the parties disputed the value at trial. Calipjo claimed that
the properties were worth 1.2 million dollars and Purdy claimed that the
properties were worth 1.7 million dollars.
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judgment as a matter of law on all claims. The motion was
denied.
2. Respondents’ Counter Arguments
Respondents argued to the jury that Calipjo failed to
present sufficient evidence to support his claims. Respondents
claimed that they did not breach the express terms of the DROAs
or commit unfair and deceptive acts or practices because the
DROAs were non-binding reservation agreements. Respondents
claimed that Regal Corp. and Calipjo, acting as “sophisticated
investor[s],” simply entered a rescindable agreement for the
sale of two properties. They argued that condition C-67 of the
Aliʻi property DROA, as amended, granted the buyer and the seller
the right to cancel the agreements at any time before the Final
Condominium Public Report was issued. Because the purchase of
the Moana property was contingent on the purchase of the Aliʻi
property, Respondents claimed, Regal Corp. lawfully exercised
its right to cancel both DROAs.
In addition, Respondents asserted that there was
insufficient evidence to support a finding of alter ego and
emphasized that “[t]he only evidence [of alter ego] in this case
is that [Purdy] owned both companies.” Respondents stressed
that exclusive ownership, alone, is not determinative of alter
ego. Respondents denied Calipjo’s claim that Purdy intended to
cancel the DROAs from the start and only used the DROAs to
13
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attract financing for his own personal gain. Purdy testified
that the properties “weren’t actively for sale” and he did not
intend to sell the properties until Calipjo approached him and
made an offer. Purdy also denied Calipjo’s claim that Purdy
approached him outside the courthouse and said that he never
intended to sell Calipjo the properties.14 Although Respondents
did not specifically address the undercapitalization claim,
Purdy testified that the transfer of the properties from Regal
Corp. to Regal LLC for no cash or consideration was “pretty
commonplace.” At the close of their case, Respondents renewed
their motion for judgment as a matter of law as to all claims.
They argued that Purdy was not a party to the DROAs and there
was “no evidence or testimony that would allow [the jury] to
pierce the LLC veil or the corporate veil.” Again, the circuit
court denied the motion.
3. Jury Instructions
The circuit court provided the following jury
instructions for the alter ego claim:
14
On direct examination, Purdy testified as follows:
[A.] By all means, I just put out my hand to say hi
to him, because he happened to be facing me, and I wanted
to see if I could see what was going on, you know, to open
a conversation with these folks.
Q. Did you ever tell him that you wouldn’t have sold
the property to him anyway?
A. No.
14
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Under the alter ego claim for relief, three elements
must be established in order to award a piercing of the
corporate veil. One, that the corporation was the mere
instrumentality of the shareholder; two, that the
shareholder exercised control over the corporation in such
a way as to harm the plaintiff; and, three, that a refusal
to disregard the corporate entity would subject the
plaintiff to unjust loss.
. . . .
A corporation is, for most purposes, a legal entity
distinct from its individual members or stockholders, who,
as natural persons emerged into the corporate identity.
However, the idea that a corporation is a legal entity
existing separate and apart from the persons composing it
is a mere fiction introduced for purposes of convenience
and to serve the ends of justice. This fiction cannot be
urged to an extent and purpose not within its reason and
policy and, in an appropriate case, and in furtherance of
the ends of justice, a corporation and the individual and
individuals owning all its stock and assets may be treated
as identical.
In this case, plaintiff dealt with the corporation
known as Regal Capital Corporation and Antigua and Barbuda
Corporation, one of the defendants in this case.
Plaintiff urges that this is an appropriate case in
which the legal entity of Regal Capital Corporation should
be disregarded and that plaintiff should be entitled to
require payment of damages that Regal Capital Corporation
owes plaintiff from defendant Jack Purdy.
You should consider the following facts in
determining whether or not to disregard the legal entity of
Regal Capital Corporation and return a verdict in favor of
plaintiff against Defendant Jack Purdy, as an individual.
One, whether or not defendant Jack Purdy owned all or
substantially all the stock in Regal Capital Corporation;
two, whether or not Jack Purdy exercised discretion and
control over the management of Defendant Regal Capital
Corporation; three, whether or not Defendant Jack Purdy
directly or indirectly furnished all or substantially all
of the financial investment in Defendant Regal Capital
Corporation; four, whether or not Regal Capital Corporation
was adequately financed either originally or subsequently
for the business in which it was to engage.
Five, whether or not there was actual participation
in the affairs of Regal Capital Corporation by its
stockholders and whether stock was issued to them. Six,
whether or not Regal Capital Corporation observed the
[formalities] of doing business as a corporation such as
the holding of regular meetings, the issuance of stock, the
filing of necessary reports and similar matters. Seven,
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whether or not Defendant Regal Capital Corporation [dealt]
exclusively with Defendant Jack Purdy, directly or
indirectly in the real estate sales development activities
in this case. Eight, whether or not Defendant Regal
Capital Corporation existed merely to do a part of business
of Defendant Jack Purdy.
If your determination of these facts or most of them,
as well as the other evidence in this case leads you to
believe that you should disregard the legal entity known as
Defendant Regal Capital Corporation, then you will be
justified in returning a verdict against Defendant Jack
Purdy individually in such amount as you find due plaintiff
from Defendant Regal Capital Corporation. On the other
hand, if your consideration of these questions of fact or
most of them, as well as the other evidence in this case,
leads you to believe that Defendant Regal Corporation
should be considered a legal entity distinct from its
individual stockholders, then you will not return a verdict
against Defendant Jack Purdy on this claim.[15]
The jury was instructed as follows on the breach of contract
claim:
A contract is an agreement between two or more
persons which creates an obligation to do or not to do
something. A contract may be written or oral. A contract
requires proof of all of the following elements.
One, persons with the capacity and authority to enter
into the contract; and, two, an offer; and, three, an
acceptance of that offer producing a mutual agreement or a
meeting of the minds between the persons as to all of the
essential terms of the agreement at the time the offer was
accepted; and, four, consideration.
An offer is an expression of willingness to enter
into a contract which is made with the understanding that
the acceptance of the offer is sought from the person to
whom the offer is made. An offer must be sufficiently
definite or must call for such definite terms in the
acceptance that the consideration promised is reasonably
clear.
. . . .
Consideration is an exchange which is bargained for
by the parties where there is a benefit to one making the
promise or a loss or detriment to the one receiving the
promise.
15
Identical jury instructions were provided for the alter ego claim
against Regal LLC and the alter ego claim against Regal Corp.
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Promises given in exchange for each other can be
valid consideration.
To prevail on the claim for breach of contract,
plaintiff must prove all of the following elements. One,
the existence of the contract; and, two, plaintiff’s
performance; and, three, defendants’ failure to perform an
obligation under the contract; and, four, defendants’
failure to perform the legal cause of damage to plaintiff’s
[sic]; and, five, the damage was of the nature and extent
reasonably foreseeable by defendants at the time the
contract was entered into.
Finally, the circuit court provided the following jury
instructions for the unfair and deceptive acts or practices
claim:
To prevail against defendants on the claim of unfair
and deceptive acts or practices, plaintiff must prove all
of the following elements.
One, plaintiff is a consumer; and, two, defendant
engaged in an act or practice that was unfair or deceptive;
and, three, the unfair or deceptive act or practice
occurred in the conduct of trade or commerce; and, four,
that the unfair or deceptive act or practice was a legal
cause of damages to plaintiff.
A consumer is an individual who, primarily for
personal, family or household purposes, purchases goods or
services, attempts to purchase goods or services, is
solicited to purchase goods or services, or commits --
money property or services in a personal investment.
An act or practice is unfair if it offends
established public policy and is immoral, unethical,
oppressive, unscrupulous, or substantially injurious to
consumers.
An act or practice is deceptive if it is a . . .
material representation, . . . omission or practice that is
likely to mislead consumers acting reasonably under the
circumstances.
Plaintiff need not show that defendant intended to
deceive plaintiff or that plaintiff was actually deceived.
It is sufficient if the representation, omission or
practice was likely to deceive. The representation,
omission or practice is material if it involves information
that is important to consumers and it is likely to affect
their choice of or conducting -- conduct regarding a
product, service or investment.
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An object or practice occurs in the conduct of trade
or commerce if it is in the context of business activity or
a business transaction.
No objection was made to the jury instructions.
4. Jury Verdict and Award
The jury concluded in relevant part that Regal. Corp
breached the DROAs and breached the covenant of good faith and
fair dealing implied in the DROAs. Additionally, the jury found
that Regal Corp. and Regal LLC engaged in unfair and deceptive
acts or practices. In response to special interrogatories, the
jury also determined that Purdy was the alter ego of both Regal
Corp. and Regal LLC.16 Accordingly, Purdy was liable for breach
of contract, breach of the covenant of good faith and fair
dealing, and unfair and deceptive acts or practices.17 After
16
The jury noted that Purdy was the alter ego of Regal Corp. and
Regal LLC on the special verdict form:
VI. ALTER EGO: REGAL CAPITAL CORPORATION
A. Is Jack Purdy the alter ego of Regal Capital
Corporation?
() Yes ( ) No
Please proceed to Section VII.
VII. ALTER EGO: REGAL CAPITAL COMPANY, LLC
A. Is Jack Purdy the alter ego of Regal Capital Company,
LLC?
() Yes ( ) No
17
Judgment was entered in favor of Calipjo as follows:
(continued . . .)
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(. . . continued)
[W]ith respect to Count 3 of the First Amended
Complaint (breach of the Alii Ranch Estates Reservation
DROA claim), $1.00 against Defendant Jack Purdy and $1.00
against Defendant Regal Capital Corporation, plus statutory
interest currently in the amount of ten percent (10%) per
annum until paid in full;
with respect to Count 4 of the First Amended
Complaint (breach of the Moana Ranch Estates Reservation
DROA claim), $1.00 against Defendant Jack Purdy and $1.00
against Defendant Regal Capital Corporation, plus statutory
interest currently in the amount of ten percent (10%) per
annum until paid in full;
with respect to Count 11 of the First Amended
Complaint (breach of the covenant of good faith and fair
dealing regarding the Alii Ranch Estates Reservation DROA
claim), $1.00 against Defendant Jack Purdy and $1.00
against Defendant Regal Capital Corporation, plus statutory
interest currently in the amount of ten percent (10%) per
annum until paid in full;
with respect to Count 11 of the First Amended
Complaint (breach of the covenant of good faith and fair
dealing regarding the Moana Ranch Estates Reservation DROA
claim), $1.00 against Defendant Jack Purdy and $1.00
against Defendant Regal Capital Corporation, plus statutory
interest currently in the amount of ten percent (10%) per
annum until paid in full;
with respect to Count 10 of the First Amended
Complaint (unfair and deceptive trade practices claim),
$166,865.00 against Defendant Jack Purdy, $166,875.00
against Defendant Regal Capital Corporation, and $7,500.00
against Defendant Regal Capital Company, LLC, plus
statutory interest currently in the amount of ten percent
(10%) per annum until paid in full;
with respect to the claim for attorneys’ fees and
costs, $38,213.46 against Defendant Jack Purdy, $38,213.46
against Defendant Regal Capital Corporation, and $1,559.74
against Defendant Regal Capital Company, LLC, plus
statutory interest currently in the amount of ten percent
(10%) per annum until paid in full; and
with respect to the monetary judgments entered
against both Regal Capital Corporation and Regal Capital
Company, LLC, Defendant Jack Purdy shall be joint and
severally liable.
Judgment was entered in favor of Regal LLC, and against Calipjo, as follows:
(continued . . .)
19
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entry of the final judgment, Respondents filed a renewed motion
for judgment as a matter of law as to all claims. In light of
the conflicting evidence introduced at trial, and viewing “the
evidence in the light most favorable to the party that secured
the jury verdict,” the circuit court denied Respondents’ renewed
motion for judgment as a matter of law.
B. ICA Judgment
On appeal to the ICA, Respondents argued that the
circuit court erred in denying their motions for judgment as a
matter of law.18 They claimed, inter alia, that Calipjo
(. . . continued)
[W]ith respect to Count 3 of the First Amended
Complaint (breach of the Alii Ranch Estates Reservation
DROA claim);
with respect to Count 4 of the First Amended
Complaint (breach of the Moana Ranch Estates Reservation
DROA claim);
with respect to Count 11 of the First Amended
Complaint (breach of the covenant of good faith and fair
dealing regarding the Alii Ranch Estates Reservation DROA
claim); and
with respect to Count 11 of the First Amended
Complaint (breach of the covenant of good faith and fair
dealing regarding the Moana Ranch Estates Reservation DROA
claim).
18
Respondents argued that Purdy was entitled to judgment as a
matter of law on the following claims: breach of contract, breach of the
covenant of good faith and fair dealing, and unfair and deceptive acts or
practices. Respondents claimed that, because Purdy was not the alter ego of
Regal Corp. and Regal LLC, nor a party to the DROAs, he could not be held
liable for breaching the express or implied terms of the agreements. In
addition, because Purdy did not negotiate the terms of the DROAs, Respondents
argued that he could not have engaged in unfair and deceptive acts or
practices. The ICA concluded that Purdy was not the alter ego of Regal Corp.
or Regal LLC and, therefore, he could not be held liable based on contract
(continued . . .)
20
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presented no evidence that Purdy was the alter ego of Regal
Corp. and Regal LLC, that Regal Corp. breached the DROAs, or
that Regal LLC committed unfair and deceptive acts or practices.
Calipjo countered that evidence presented at trial supported the
jury’s verdict.
The ICA determined that there was no evidence
introduced at trial to support the jury’s findings that (1)
Regal Corp. breached the DROAs, (2) Regal LLC engaged in unfair
and deceptive acts or practices, and (3) Purdy was the alter ego
of Regal Corp. and Regal LLC.19 Calipjo, 2017 WL 6547461, at *4-
*7.
As to the alter ego claim, the ICA acknowledged that
Purdy was the sole owner of Regal Corp. and Regal LLC, however,
it found that this fact, alone, was insufficient to support the
jury’s verdict. Id. at *3-*4. The ICA concluded that the
evidence presented at trial did not establish
undercapitalization—one factor relevant to whether an individual
(. . . continued)
theories or for unfair or deceptive acts or practices. Calipjo, 2017 WL
6547461, at *4, *6. Additionally, the ICA rejected Calipjo’s alternative
argument that Purdy was liable for unfair and deceptive acts or practices
pursuant to HRS § 480-17(a) (2008), which provides that individual directors
and officers of a corporation may be held liable for acts of a corporation
that violate the penal provisions of HRS chapter 480, because the jury did
not find that Regal Corp. violated penal provisions of HRS chapter 480. Id.
at *6.
19
However, the ICA found there was sufficient evidence to support
the jury’s finding that Regal Corp. breached the covenant of good faith and
fair dealing. Id. at *5.
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acts as the alter ego of a company. Id. at *4. It defined
undercapitalization as “[t]he financial condition of a firm that
does not have enough capital to carry on its business.” Id.
(quoting Black’s Law Dictionary 251 (10th ed. 2014)). The ICA
stated that the trial testimony had “nothing to do with [the]
capitalization” of the entities and it did not “infer any
particular level of capitalization of Regal Corp., let alone
undercapitalization such that it would bring about injustice and
inequity not to find Purdy to be the alter ego of Regal Corp.”
Id. Additionally, the ICA held that the transfer of the Aliʻi
and Moana properties from Regal Corp. to Regal LLC did not
constitute a fraudulent transfer or an abuse of the corporate
form. Id. It noted that “[t]his case does not involve
findings, or even claims, of fraudulent transfer with respect to
these transfers. There is no evidence that these transfers
rendered Regal Corp. unable to satisfy its corporate debts and
obligations.” Id. The ICA concluded that Purdy’s purported
statement that he never intended to sell the properties to
Calipjo was insufficient evidence to support a finding of alter
ego. Id. In light of these conclusions, the ICA reversed in
part the final judgment, concluding that “there was no evidence
to support the jury’s verdict that Purdy was the alter ego of
Regal Corp. and Regal LLC.” Id.
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Because the ICA reversed the jury’s finding that Purdy
was the alter ego of Regal Corp. and Regal LLC, it reversed the
underlying claims and damages awards against Purdy for breach of
contract, breach of the covenant of good faith and fair dealing,
and unfair and deceptive acts or practices. Id. at *4, *6. The
ICA reasoned that absent a finding of alter ego, Purdy could not
be held personally liable for the claims because Regal Corp. and
Regal LLC shielded him from liability. Id. The ICA explained
that “Calipjo’s contract claims against Purdy are entirely
dependent on the assertion that Purdy is the alter ego of Regal
Corp. [and Regal LLC.]” Id. at *4.
The ICA also upheld the judgment against Regal Corp.
for unfair or deceptive acts or practices, but held that there
was no evidence that Regal LLC had engaged in an unfair or
deceptive act or practice.20 Id. at *6. Having ruled that there
was no evidence that Purdy was the alter ego of Regal Corp., and
rejecting Calipjo’s alternative argument that Purdy was liable
for unfair or deceptive acts or practices pursuant to HRS § 480-
20
Because the ICA vacated the circuit court’s judgment that Regal
LLC committed unfair and deceptive acts or practices, the ICA also vacated
and remanded the circuit court’s denial of Regal LLC’s request for attorneys’
fees. Calipjo, 2017 WL 6547461, at *6.
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17(a),21 the ICA also held Purdy could not be held liable for
unfair or deceptive acts or practices.22 Id.III. STANDARD OF REVIEW
This court reviews a trial court’s ruling on a motion
for judgment as a matter of law de novo:
A trial court’s ruling on a motion for judgment as a
matter of law is reviewed de novo. “A [motion for judgment
as a matter of law] may be granted only when after
disregarding conflicting evidence, giving to the non-moving
party’s evidence all the value to which it is legally
entitled, and indulging every legitimate inference which
may be drawn from the evidence in the non-moving party’s
favor, it can be said that there is no evidence to support
a jury verdict in his or her favor.”
Ray v. Kapiolani Med. Specialists, 125 Hawaiʻi 253, 261, 259 P.3d
569, 577 (2011) (internal citations omitted); see also Hawaiʻi
Rules of Civil Procedure Rule 50(a)(1) (“If during a trial by
jury a party has been fully heard on an issue and there is no
legally sufficient evidentiary basis for a reasonable jury to
find for that party on that issue, the court may determine the
issue against that party and may grant a motion for judgment as
a matter of law against that party with respect to a claim or
21
See supra note 18, at 20-21.
22
The ICA also affirmed the judgment against Regal Corp. for breach
of the covenant of good faith and fair dealing, unfair and deceptive acts or
practices, and treble damages totaling $166,875.00 arising from the unfair
and deceptive acts or practices claim. Calipjo, 2017 WL 6547461, at *7.
Because these issues are not raised in the application to this court, we
affirm the ICA’s judgment in part.
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defense that cannot under the controlling law be maintained or
defeated without a favorable finding on that issue.”).
IV. DISCUSSION
A motion for judgment as a matter of law is granted
only if there is no evidence to support the jury’s verdict.
Ray, 125 Hawaiʻi at 261, 259 P.3d at 577. In making this
determination, the court must disregard conflicting evidence,
give “to the non-moving party’s evidence all the value to which
it is legally entitled, and indulg[e] every legitimate inference
which may be drawn from the evidence in the non-moving party’s
favor[.]” Id. (internal quotation marks and citation omitted).
Applying this standard, we examine the record de novo to
determine whether evidence was introduced to support the jury’s
determination that Purdy is the alter ego of Regal Corp. and
Regal LLC, that Regal Corp. breached the DROAs, and that Regal
LLC committed unfair and deceptive acts or practices.
A. The Jury’s Verdict that Purdy was the Alter Ego of
Regal Corp. and Regal LLC was Supported by Evidence
Courts have identified a variety of factors to
determine whether a corporate entity is the alter ego of
another, though no single factor is dispositive.23 Robert’s
23
These factors include:
[1] Commingling of funds and other assets, failure to
segregate funds of the separate entities, and the
(continued . . .)
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(. . . continued)
unauthorized diversion of corporate funds or assets to
other than corporate uses; [2] the treatment by an
individual of the assets of the corporation as his own; [3]
the failure to obtain authority to issue stock or to
subscribe to or issue the same; [4] the holding out by an
individual that he is personally liable for the debts of
the corporation; [5] the identical equitable ownership in
the two entities; [6] the identification of the equitable
owners thereof with the domination and control of the two
entities; [7] identi[ty] of . . . directors and officers of
the two entities in the responsible supervision and
management; [8] sole ownership of all of the stock in a
corporation by one individual or the members of a family;
[9] the use of the same office or business location; [10]
the employment of the same employees and/or attorney; [11]
the failure to adequately capitalize a corporation; [12]
the total absence of corporate assets, and
undercapitalization; [13] the use of a corporation as a
mere shell, instrumentality or conduit for a single venture
or the business of an individual or another corporation;
[14] the concealment and misrepresentation of the identity
of the responsible ownership, management and financial
interest, or concealment of personal business activities;
[15] the disregard of legal formalities and the failure to
maintain arm’s length relationships among related entities;
[16] the use of the corporate entity to procure labor,
services or merchandise for another person or entity; [17]
the diversion stockholder [sic] or other person or entity,
to the detriment of creditors, or the manipulation of
assets and liabilities between entities so as to
concentrate the assets in one and the liabilities in
another; [18] the contracting with another with intent to
avoid performance by use of a corporate entity as a shield
against personal liability, or the use of a corporation as
a subterfuge of illegal transactions; and [19] the
formation and use of a corporation to transfer to it the
existing liability of another person or entity.
Robert’s Hawaii School Bus, Inc. v. Laupahoehoe Transp. Co., 91 Hawaiʻi
224, 242, 982 P.2d 853, 871 (1999), superseded by statute on other
grounds as noted in Davis v. Four Seasons Hotel Ltd., 122 Hawaiʻi 423,
428 n.9, 228 P.3d 303, 308 n.9 (2010) (alterations in original)
(emphasis removed) (citing Associated Vendors, Inc. v. Oakland Meat
Co., 26 Cal. Rptr. 806, 813-15 (Cal. Dist. Ct. App. 1962)). Courts
also consider:
(1) incorporation for the purpose of circumventing public
policy or statutes; (2) whether the parent finances the
subsidiary; (3) whether the subsidiary has no business or
assets except those conveyed to it by the parent; (4)
whether the parent uses the subsidiary’s property as its
own; (5) whether the directors of the subsidiary do not act
(continued . . .)
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Hawaii, 91 Hawaiʻi at 242-43, 982 P.2d at 871-72. In addition, a
two-part test must be satisfied:
[I]t must be made to appear that [1] the corporation is not
only influenced and governed by that person, but that there
is such a unity of interest . . . that the individuality,
or separateness, of such person and corporation has ceased,
and [2] that the facts are such that an adherence to the
fiction of the separate existence of the corporation would,
under the particular circumstances, sanction a fraud or
promote injustice.
Id. at 242, 982 P.2d at 871 (alterations in original) (quoting
Associated Vendors, 26 Cal. Rptr. at 813). Thus, the jury must
determine whether there was a “unity of interest” between the
individual and the corporation. Id. (quoting Associated
Vendors, 26 Cal. Rptr. at 813). A “unity of interest” means
that “[t]heir objectives are common, not disparate; their
general corporate actions are guided or determined not by two
separate . . . consciousness, but one[.]” Id. at 242, 253, 982
P.2d at 871, 882 (quoting Copperweld Corp. v. Indep. Tube Corp.,
467 U.S. 752, 771 (1984)). The jury must also consider whether
maintaining the corporate fiction would “sanction a fraud or
promote injustice.” Id. at 242, 982 P.2d at 871 (quoting
Associated Vendors, 26 Cal. Rptr. at 813). Here, entry of
(. . . continued)
independently in the interest of the corporation but take
their orders from and serve the parent; and (6) whether the
“fiction of corporate entity . . . has been adopted or used
to evade the provisions of a statute.”
Id. (quoting Kavanaugh v. Ford Motor Co., 353 F.2d 710, 717 (7th Cir. 1965)).
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judgment as a matter of law is proper only if there is no
evidence to support the jury’s verdict that there was a “unity
of interest” between the individual and the corporation and that
the corporate fiction resulted in “a fraud or promote[d]
injustice.” Id. (quoting Associated Vendors, 26 Cal. Rptr. at
813).
In this case, the jury was presented with evidence
that Purdy exercised exclusive ownership and control over Regal
Corp. and Regal LLC. Purdy testified that he was the sole
shareholder, director, and officer of Regal Corp. and the sole
member and manager of Regal LLC. This court has held that “sole
ownership of all of the stock in a corporation by one
individual” is one relevant factor to determine alter ego. Id.
(quoting Associated Vendors, 26 Cal. Rptr. at 814). Purdy’s
testimony supports the jury’s determination that Purdy exercised
exclusive ownership and control over Regal Corp. and Regal LLC;
it constitutes evidence that Purdy was the sole owner and
manager of either company.
The jury was also presented with evidence that Regal
Corp. and Regal LLC were undercapitalized24—another factor
relevant to whether Purdy was the alter ego of Regal Corp. and
24
Undercapitalization is “[t]he financial condition of a firm that
does not have enough capital to carry on its business.” Black’s Law
Dictionary 251 (10th ed. 2014).
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Regal LLC. See id. The ICA concluded that Purdy’s “testimony
did not evidence or infer any particular level of capitalization
of Regal Corp., let alone undercapitalization[.]” Calipjo, 2017
WL 6547461, at *4. However, Purdy testified that he transferred
the Aliʻi and Moana properties from Regal Corp. to Regal LLC for
no consideration. He was unable to identify the value of the
transfer. On cross-examination, Purdy provided testimony
supporting Calipjo’s claim that Regal Corp. and Regal LLC were
undercapitalized:
Q. Okay. So, now, with respect to the actual conveyances
from Regal Capital Corporation and Antigua & Barbuda
Corporation to Regal Capital Company, you transferred Alii,
which is 19 acres, is that correct, at that time?
[Purdy.] Alii One.
Q. Okay. And how much money did Regal Capital Company LLC
pay to Regal Capital Corporation for that conveyance?
[Purdy.] Can you show me a copy of it.
Q. Well, I can show you the actual title report, but I
don’t have a number on it. So I was asking you if you
know?
[Purdy.] It would be a little bit of a guess, but I could
give it a try. I would think maybe $1.2 million, in that
range.
Q. Well --
[Purdy.] I just can’t recall.
Q. Okay. Did you actually transfer that money over? Was
there a cash transfer?
[Purdy.] No.
Q. How did it work?
[Purdy.] You have to -- for tax purposes of both
companies, you have to value the property. You’d have to
discern a value. And then --
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Q. Would it surprise you to know the Kauai Business Report
said it was $36,800?
[Purdy.] Well, maybe it was just the price of the taxes.
No, I would think that would be -- no, that would really
surprise me.
Q. Okay.
[Purdy.] That would seem like the taxes.
Q. Well, here’s what I want to know. This is simple. You
got Regal -- the Antigua company owns it, right, and it’s
worth something? Okay?
[Purdy.] Yeah.
Q. As the fair market value of it. Right?
[Purdy.] Yeah.
Q. And then you transfer from the Antigua company to the
LLC, the Hawaii company. Is that right?
[Purdy.] Yes.
Q. Okay. How much money did the Antigua company give to
the Hawaii company to acquire that property?
[Purdy.] I don’t know.
Q. Okay.
[Purdy.] (Inaudible) it would have been a tax
consideration and whatever the -- I don’t know.
THE COURT: Mr. Purdy, what is the answer?
[Purdy.]: The answer is today, I don’t know.
. . . .
Q. And then I’ll ask you the same question with respect to
the Moana Ranch conveyance from Regal Capital Corporation
to Regal Capital Company, which, according to the title
report I’ve got, happened on November 7th, 2003.
[Purdy.] Okay.
Q. How much money was transferred -- how much money did
the LLC, the Regal Capital Company LLC, a Hawaii limited
company, give to Regal Capital Corporation for the transfer
of the interest in the Moana Ranch property, if you know?
[Purdy.] Well, I would just say around the amount that we
were into the property for. And in my mind -- but then you
say would it surprise me – I’m putting words in my mouth.
I would think it would have been transferred in the half-a-
million-dollar range.
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Q. Are you saying that a check for half a million dollars
was cut?
[Purdy.] No.
Q. That’s what I want to know.
[Purdy.] No.
. . . .
Q. Did you, in your capacity as president or director of
the Antigua company, write a check -- strike that. Did
you, in your capacity as the president of -- or, excuse me,
managing member of the LLC, the buyer of the property,
write a check to the Antigua Barbuda Company for the
conveyance of either of these properties?
[Purdy.] I did not.
Q. You just conveyed it and had a tax designation on it?
[Purdy.] Yeah, it would have been a book entry in terms of
the amount of money, the value that went from one
corporation to another, which I think that’s pretty
commonplace.
(Emphases added.) This testimony constitutes evidence that
Purdy was unable to explain whether or not his companies were,
in fact, adequately capitalized. For example, though he
acknowledged that the cumulative value of the Aliʻi and Moana
properties was 1.7 million dollars, he did not explain how Regal
Corp. derived any value from the transfer of these properties.
Purdy admitted that no money was exchanged. He provided answers
such as “[y]eah, it would have been a book entry in terms of the
amount of money, the value that went from one corporation to
another, which I think that’s pretty commonplace” and “[y]ou
have to -- for tax purposes of both companies, you have to value
the property. You’d have to discern a value.” Ultimately, this
evidence indicates that Regal Corp. was undercapitalized given
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that it transferred 1.7 million dollars’ worth of assets to
Regal LLC for no consideration. Thus, Purdy’s testimony
constitutes evidence supporting the jury’s verdict.
Further, Purdy’s testimony constitutes evidence that
there was a “unity of interest” between the Respondents.
Robert’s Hawaii, 91 Hawaiʻi at 242, 982 P.2d at 871 (quoting
Associated Vendors, 26 Cal. Rptr. at 813). This supports the
jury’s determinations that Purdy is the alter ego of Regal Corp.
and Purdy is the alter ego of Regal LLC. In Robert’s Hawaii,
this court stated that in order to find alter ego, there must be
“such a unity of interest . . . that the individuality, or
separateness, of such person and corporation has ceased[.]” Id.
(alteration in original) (quoting Associated Vendors, 26 Cal.
Rptr. at 813). In other words, the alter ego’s consciousness
must guide the company’s actions. See id. at 253, 982 P.2d at882 (citing Copperweld Corp., 467 U.S. at 771). Here, Purdy
testified that he authorized the transfer of Regal Corp.’s
assets because he knew that he could make more profit from a
high-end development on the property. This testimony supports a
finding that Purdy’s consciousness was guiding Regal Corp.’s
actions and objectives because Regal Corp. suffered a detriment
as a result of the transfer, while Purdy directly and personally
benefitted from it. Therefore, the jury was presented with
evidence of a “unity of interest” between Purdy and Regal Corp.
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Id. at 242, 982 P.2d at 871 (quoting Associated Vendors, 26 Cal.
Rptr. at 813).
In addition, the jury was presented with evidence that
allowing Purdy to act as the alter ego of Regal Corp. and Regal
LLC would “sanction a fraud or promote injustice.”25 Id.
(quoting Associated Vendors, 26 Cal. Rptr. at 813). Purdy
altered condition C-67 of the Aliʻi property DROA to provide
himself, the seller, the option to cancel the agreement without
providing notice to the buyer.26 Purdy testified that “[i]f the
buyer had a right to terminate, then I should have that same
right” and he directed Summers to add “or Seller” to condition
C-67 of the Aliʻi property DROA. Summers told Calipjo that the
addition of “or Seller” was Purdy’s counteroffer “and if
[Calipjo] didn’t want to acknowledge this, then he wouldn’t have
a reservation agreement.” Therefore, Purdy did not merely
suggest the incorporation of “or Seller[,]” but he insisted on
it as a condition of the DROA. Moreover, due to the contingency
in the Moana property DROA, if Purdy elected to cancel the Aliʻi
property DROA, which he ultimately did, he automatically
25
The jury was instructed that two of the essential elements of an
alter ego claim are whether “the shareholder exercised control over the
corporation in such a way as to harm the plaintiff” and whether “refusal to
disregard the corporate entity would subject the plaintiff to unjust loss.”
26
The alteration read: “Buyer or Seller may terminate this
reservation at any time prior to it becoming a binding contract by written
notice to Seller.” (Emphasis added.)
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cancelled the Moana property DROA. Summers testified that Purdy
needed an investor for the project “to do the improvements that
we planned on doing to the property.” Therefore, testimony
regarding Purdy’s forceful inclusion of the term “or Seller” may
have evidenced his intent to cancel the DROAs because it showed
that from the beginning of his dealings with Calipjo, Purdy
intended to renege on the Aliʻi property DROA. Evidence was
presented at trial that Purdy altered the Aliʻi property DROA to
remove an essential protection for the buyer. This indicates
that Calipjo would suffer an injustice as a result of Purdy’s
actions as the alter ego of Regal Corp. and Regal LLC, and
supports the jury’s verdict.
Additional evidence was presented at trial that Purdy
intended to cancel the DROAs and thereby use Regal Corp. and
Regal LLC to commit a fraud or an injustice against Calipjo.
This supports the jury’s determinations that Purdy is the alter
ego of Regal Corp. and Regal LLC. Calipjo testified that Purdy
approached him seven years after signing the DROAs and stated
that he never intended to sell Calipjo the properties. Another
witness corroborated this testimony. Therefore, the jury was
presented with evidence that Purdy used Regal Corp. and Regal
LLC to commit a fraud because he never intended to sell the
properties to Calipjo.
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“[D]isregarding conflicting evidence, giving to
[Calipjo’s] evidence all the value to which it is legally
entitled, and indulging every legitimate inference which may be
drawn from the evidence in [Calipjo’s] favor,” the record does
not support the conclusion that there was no evidence to support
the jury’s verdict in Calipjo’s favor. Ray, 125 Hawaiʻi at 261,
259 P.3d at 577.
B. The Jury’s Verdict that Regal Corp. Breached the DROAs
is Supported by Evidence
At trial, the jury was instructed on the essential
elements of a contract: (1) capacity to enter the contract, (2)
offer, (3) acceptance, and (4) consideration. This court has
held that “[i]t is well-settled that consideration is an
essential element of, and is necessary to the enforceability or
validity of, a contract.” Douglass v. Pflueger Hawaii, Inc.,
110 Hawaiʻi 520, 534, 135 P.3d 129, 143 (2006), as corrected (May
30, 2006) (quoting Shanghai Inv. Co. v. Alteka Co., 92 Hawaiʻi
482, 496, 993 P.2d 516, 530 (2000), overruled on other grounds
by Blair v. Ing, 96 Hawaiʻi 327, 335-36, 31 P.3d 184, 192-93
(2001)). We define consideration “as a bargained for exchange
whereby the promisor receives some benefit or the promisee
suffers a detriment.” Id. (quoting Shanghai, 92 Hawaiʻi at 496,
993 P.2d at 530). Furthermore, “[a] modification of a contract
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must be supported by new consideration.” Shanghai, 92 Hawaiʻi at
496, 993 P.2d at 530.
Based on the testimony presented at trial, “indulging
every legitimate inference which may be drawn from the evidence
in [Calipjo’s] favor,” we cannot say that the jury’s finding
that Regal Corp. breached the DROAs was not supported by
evidence. Ray, 125 Hawaiʻi at 261, 259 P.3d at 577. Lengthy
testimony was offered by Summers, Purdy, and Calipjo regarding
the alteration to condition C-67 of the Aliʻi property DROA that
gave Regal Corp., the seller, the right to cancel the Aliʻi
property DROA at any time before the Final Condominium Public
Report was released. This testimony notably lacks mention of
any new benefit to Calipjo for modifying the original agreement.
Because the modification to condition C-67 of the Aliʻi property
DROA was not supported by consideration, it is void. Therefore,
there was evidence at trial that Regal Corp. breached the
express terms of the original contract when it cancelled the
DROAs and the ICA’s determination that there is no evidence that
Regal Corp. breached the DROAs is error.
C. The Jury’s Verdict that Regal LLC Committed Unfair and
Deceptive Acts or Practices is Supported by Evidence
The ICA concluded that there is no evidence to support
a finding that Regal LLC engaged in unfair and deceptive acts or
practices. Calipjo, 2017 WL 6547461, at *6. “A deceptive act
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or practice is ‘(1) a representation, omission, or practice that
(2) is likely to mislead consumers acting reasonably under the
circumstances where (3) the representation, omission, or
practice is material.’” Hungate v. Law Office of David B.
Rosen, 139 Hawaiʻi 394, 411, 391 P.3d 1, 18 (2017) (brackets
omitted) (quoting Courbat v. Dahana Ranch, Inc., 111 Hawaiʻi 254,
262, 141 P.3d 427, 435 (2006)). “A representation, omission, or
practice is considered material if it ‘involves information that
is important to consumers and, hence, likely to affect their
choice of, or conduct regarding, a product.’” Id. (citation
omitted). The test for whether an act or omission is deceptive
is an objective test, and it turns “on whether the act or
omission is likely to mislead consumers, . . . as to information
important to consumers . . . in making a decision regarding the
product or service.” Id. (internal citations and quotation
marks omitted) (alterations in original).
Giving the evidence presented at trial “all the value
to which it is legally entitled, and indulging every legitimate
inference which may be drawn from the evidence in [Calipjo’s]
favor,” it is apparent that the jury could have determined that
the acts or omissions of Regal LLC misled Calipjo as to
information critical to his position as the buyer of the Aliʻi
and Moana properties. Ray, 125 Hawaiʻi at 261, 259 P.3d at 577.
Purdy testified that as early as 2000, Regal LLC was heavily
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involved in the development of the Aliʻi and Moana properties.
Just eight months after the parties entered the DROAs on August
12, 2002, Regal Corp. transferred the Aliʻi property to Regal LLC
for no consideration. Regal Corp. and Regal LLC did not notify
Calipjo that the DROAs were cancelled until three months later,
on August 7, 2003. Thus, there is evidence to support the
jury’s conclusion that Regal LLC’s role in the development of
the properties, and ultimate ownership of the properties,
involves information that would be important to consumers such
as Purdy, and was likely to affect Purdy’s conduct regarding the
DROAs.27
D. The Underlying Claims Against Purdy are Reinstated
The ICA reversed all claims against Purdy including
breach of contract, breach of the covenant of good faith and
fair dealing, and unfair and deceptive acts or practices.
Calipjo, 2017 WL 6547461, at *7. The ICA reasoned that absent a
finding of alter ego, Purdy was not a party to the Aliʻi and
Moana property DROAs. Id. at *4. Therefore, he could not be
held liable for breaching the express and implied terms of
27
Because we vacate the ICA’s determination that no evidence
supports the jury’s finding that Regal LLC committed unfair and deceptive
acts or practices, we also vacate the ICA’s holding that the circuit court
erred in determining that Regal LLC is not entitled to attorneys’ fees.
Calipjo, 2017 WL 6547461, at *6.
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either DROA, or unfair and deceptive acts or practices. Id. at
*4, *6.
Accordingly, the ICA erroneously overturned the jury’s
verdict regarding alter ego and reversed the judgment against
Purdy for breach of contract, breach of the covenant of good
faith and fair dealing, and unfair and deceptive acts or
practices. This court has held that the alter ego doctrine does
not create a separate cause of action, but rather, creates a
means for an individual (the alter ego) to be held personally
liable for a cause of action against a corporate entity:
A claim based on the alter ego theory is not in
itself a claim for substantive relief, but rather to
disregard the corporation as a distinct defendant is
procedural. A finding of fact of alter ego, standing
alone, creates no cause of action. It merely furnishes a
means for a complainant to reach a second corporation or
individual upon a cause of action that otherwise would have
existed only against the first corporation. An attempt to
pierce the corporate veil is a means of imposing liability
on an underlying cause of action, such as a tort or breach
of contract. The alter ego doctrine is thus remedial, not
defensive, in nature. One who seeks to disregard the
corporate veil must show that the corporate form has been
abused to the injury of a third person.
Robert’s Hawaii, 91 Hawaiʻi at 241, 982 P.2d at 870 (emphasis in
original) (quoting 1 William Meade Fletcher et al., Fletcher
Cyclopedia of the Law of Private Corporations § 41.10, at 568-81
(perm. ed. 1999)). Although Purdy was not named as a party to
the DROAs, the jury determined that he functioned as the alter
ego of Regal Corp. and Regal LLC. Because the jury found that
Purdy was the alter ego of Regal Corp. and Regal LLC, Purdy was
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held liable for the underlying claims.28 See id. The ICA’s
reversal of the final judgment as to these claims was error.
V. CONCLUSION
The ICA’s holding that no evidence supported the
jury’s verdict that Regal Corp. breached the DROAs, Regal LLC
engaged in unfair and deceptive acts or practices, and Purdy was
the alter ego of Regal Corp. and Regal LLC was error. Because
evidence supported the jury’s verdict that Purdy is the alter
ego, he is liable for breach of contract, breach of the covenant
of good faith and fair dealing, and unfair and deceptive acts or
practices. Accordingly, we affirm in part and vacate in part
the January 24, 2018 judgment of the ICA and reinstate the
circuit court’s July 18, 2014 final judgment.
Donna E. Richards, /s/ Mark E. Recktenwald
Mark R. Zenger
for Petitioner /s/ Paula A. Nakayama
/s/ Sabrina S. McKenna
Richard E. Wilson /s/ Richard W. Pollack
for Respondents
/s/ Michael D. Wilson
28
On the special verdict form, with respect to the Aliʻi and Moana
property DROAs, the jury determined that Purdy breached his contractual
obligations, failed to act with good faith and fair dealing, and committed
unfair and deceptive acts or practices.
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