Hawaiian Association of Seventh-Day Adventists v. Wong.Â

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Electronically Filed
Supreme Court
SCWC-28592
28-JUN-2013
08:47 AM

IN THE SUPREME COURT OF THE STATE OF HAWAI#I

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________________________________________________________________

HAWAIIAN ASSOCIATION OF SEVENTH-DAY ADVENTISTS
A Hawai#i Non-Profit Corporation,
Respondent/Plaintiff-Appellant-Cross-Appellee,

vs.

STACEY T.J. WONG, As Trustee of the Eric A Knudsen Trust,
Petitioner/Defendant-Appellee-Cross-Appellant.
________________________________________________________________

SCWC-28592

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(ICA NO. 28592; CIV. NO. 03-1-0026)

June 28, 2013

RECKTENWALD, C.J., NAKAYAMA, AND MCKENNA, JJ.;
WITH POLLACK, J., DISSENTING SEPARATELY,
WITH WHOM ACOBA, J., JOINS

OPINION OF THE COURT BY MCKENNA, J.

I. Introduction

Hawaiian Association of Seventh-Day Adventists, a

Hawai#i non-profit corporation (“SDA”), filed suit seeking, among

other things, a declaration that its rental of cabins to the

public is permissible under its lease agreement with the Eric A.
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Knudsen Trust (“Lease”). Stacey T.J. Wong, as trustee of the

Eric A. Knudsen Trust (“Wong”), counterclaimed for termination of

the Lease and other remedies. The circuit court, inter alia,

granted summary judgment in favor of Wong on SDA’s claim

regarding cabin rentals, but granted summary judgment in favor of

SDA on Wong’s claims for termination and equitable relief. The

Intermediate Court of Appeals (“ICA”) vacated summary judgment as

to the issue of cabin rentals, opining that such use of the

Property is permissible under the terms of the Lease, and

remanded the case for further proceedings.

We conclude that the ICA correctly vacated the court’s

judgment in favor of Wong on SDA’s claim regarding cabin rentals

(Count I of the Complaint), but for the wrong reasons. Contrary

to the parties’ stipulation and the ICA’s conclusion, we hold

that Paragraph 16 of the Lease, which delineates permissible uses

of the Property, is ambiguous. If, on remand, the fact-finder

determines that Paragraph 16 prohibits the use of cabins by the

general public, Wong may be entitled to damages for breach of

contract and/or disgorgement of profits. The ICA therefore also

erred in affirming summary judgment in favor of SDA on Wong’s

claims for breach of contract and unjust enrichment (Counts II

and III of the Counterclaim). We conclude that the ICA correctly

vacated the circuit court’s order awarding attorneys’ fees and

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costs to Wong; we also, however, vacate the ICA’s order awarding

costs on appeal to SDA because a prevailing party has yet to be

determined. Except for Wong’s claim for termination of the Lease

(Count I of the Counterclaim), on which the ICA properly affirmed

summary judgment, we therefore vacate the ICA’s Judgment on

Appeal and remand this case for further proceedings consistent

with this opinion.

II. Background

A. Factual Background

The subject 200-acre parcel of land (“Property”) is

part of a 940-acre parcel located in Koloa, Kaua#i, originally

owned by the Augustus F. Knudsen Trust and the Eric A. Knudsen

Trust (collectively, “the Trusts”). In 1949, the Trusts leased

the Property to Valdemar L’Orange Knudsen who, in turn, assigned

the lease to Kahili Mountain Park, Inc. (“KMPI”), a company owned

by several beneficiaries of the Trusts. KMPI subsequently

constructed campgrounds and facilities, including cabins that it

rented to the general public as vacation residences. This area

became known as Kahili Mountain Park (“the Park”).

Beginning in 1982, KMPI negotiated to sell its capital

stock and its leasehold interest in the Park to SDA, which

planned to construct a school on part of the Property. SDA

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closed its acquisition of KMPI’s outstanding stock in 1984, at

which point the 1949 lease was assigned to SDA, KMPI was

dissolved, and a new lease was negotiated with the Trusts.

On December 31, 1984, SDA and the Trusts executed a new

sixty-year lease, effective January 1, 1985. Paragraph 16 of the

subject Lease delineates allowable uses of the Property as

follows:
16. Use of Demised Premises. The demised premises shall be
used only for educational, recreation (including vacation
residence for members and staff of Lessee’s school and
church), agricultural, health care and humanitarian uses.
No dwellings shall be constructed or used on the demised
premises except for faculty, administrative staff, students
and employees. If Lessee ceases to use the demised premises
for the above purposes, Lessor shall have the right to
terminate this Lease.

Paragraph 26 of the Lease is a nonwaiver clause, which

gives SDA an thirty-day window to remedy any alleged breach:
26. Nonwaiver. Acceptance of rent by Lessor or its agent
shall not be deemed to be a waiver by Lessor of any breach
by the Lessee of any term, covenant or condition of this
Lease herein contained, nor of Lessor’s right to declare and
enforce a forfeiture for any such breach, and that the
failure of Lessor to insist upon strict performance of any
of the terms, covenants or conditions of this Lease, or to
exercise any option herein conferred in any one or more
instances shall not be construed as a waiver or
relinquishment for the future of any such terms, covenants,
conditions or options, but the same shall be and remain in
full force and effect; PROVIDED, HOWEVER, that before any
forfeiture shall be enforced, Lessor shall give written
notice to Lessee of the breach constituting the ground of
forfeiture, and Lessee shall have thirty (30) days from the
date of such notice within which to remedy or cure such
breach, and if such breach shall be so cured or remedied,
then such breach shall be waived and no forfeiture shall be
enforced for such breach . . . .

SDA’s principal objective in leasing the Property was

to develop and operate a kindergarten through twelfth-grade

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school (“School”). After obtaining the necessary permits, SDA

developed the Property, opened its new School, and constructed

houses for faculty and staff. In addition, SDA continued KMPI’s

practice of renting cabins to the public, used the rental income

to support the School, and constructed additional cabins pursuant

to permits previously obtained by KMPI.1

Between 1984 and 2000, the Trusts were aware of SDA’s

continued vacation rentals to the public. There was no

communication from the Trusts that these rentals might violate

the Lease. By late 2000, however, three major changes occurred:

Valdemar L’Orange Knudsen, who had been a strong supporter of the

School, died; the Augustus F. Knudsen Trust terminated and the

Eric A. Knudsen Trust (“EAK Trust”) acquired a hundred-percent

fee interest in the Property; and the trustee for EAK Trust

changed from First Hawaiian Bank to Wong.

In an April 4, 2001 letter to SDA, Wong asserted that

“the Adventists are in material default of the Kahili Adventist

School/Mountain Park lease with respect to the Permitted Uses

provision.” Wong did not explain how SDA had violated the Lease

or ask SDA to cease its practice of renting cabins to the public.

He warned, however, that he could pursue several legal remedies
1
SDA constructed a total of 17 additional cabins, in addition to
the 25 cabins that were in existence when KMPI sold its leasehold interest.
Of these 42 structures, approximately 31 were available for vacation rental
prior to March 2002, when SDA ceased its rentals.

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against SDA including termination of the Lease, eviction from the

Property, and a suit for monetary damages and legal fees. Wong

stated that he supported SDA’s vision of enhancing the property,

and he hoped that they could work together to achieve this

mission, fulfill the Property’s potential, and satisfy the past

breach. Using SDA’s financial statements from June 1984 to

January 2000, Wong calculated that SDA owed $642,551.33 in unpaid

rent, based on a rate of ten percent of gross revenues from SDA’s

cabin rentals. Wong proposed that SDA prepare a detailed five-

year business plan for expanding the Park, enter into a new lease

that would permit commercial use of the Property, and pay EAK

Trust ten percent of gross non-School related revenues.

SDA retained a consultant to prepare a five-year

business plan and evaluate Wong’s proposal for expansion;

however, it refused to make retroactive payment of percentage

rents. Wong rejected SDA’s business plan and characterized its

failure to tender payment as “evidence of bad faith.” In a

letter dated March 6, 2002, Wong demanded that SDA cease “all

commercial vacation rental operations” and pay “an amount equal

to ten percent (10%) of the gross revenues received by [SDA] from

the commencement of the commercial vacation rental operations in

1985 until the date such operations cease pursuant to this

demand,” plus a ten percent interest rate and general excise tax.

On March 13, 2002, SDA notified Wong that it would
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cease renting cabins to the public in order to avoid termination

of the Lease. SDA maintained, however, that rental of the cabins

to the public was a permitted recreational use. It also noted

that ceasing rentals would cause significant monetary losses and

could result in SDA closing its School. SDA immediately ceased

booking reservations for cabins but, pursuant to an agreement

with Wong, continued to honor reservations that had been made

before March 6, 2002.

B. Circuit Court Proceedings

On March 10, 2003, SDA filed a Complaint in the Circuit

Court for the Fifth Circuit (“circuit court”),2 seeking a

declaratory judgment that its operation of the Park, including

commercial uses of the Property and rental of cabins to the

public as vacation residences, was permitted under the Lease

(“Count I of the Complaint”). SDA also alleged that the Lease

had been orally amended to permit continued rental of the cabins

(“Count II of the Complaint”); that Wong’s allegations of breach

were barred by waiver and estoppel based on the Trusts’ knowledge

of these rental activities (“Count III of the Complaint”); and

that Wong should be enjoined from threatening to terminate the

Lease and interfering with the cabins rentals, since these

2
The Honorable Kathleen N.A. Watanabe presided.

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actions would seriously and irreparably damage SDA (“Count IV” of

the Complaint”). In addition, SDA sought damages for Wong’s

wrongful demand that SDA halt its vacation rentals to the public

(“Count VI of the Complaint”). The Complaint did not contain a

Count V.

On April 1, 2003, Wong filed an Answer and

Counterclaim, seeking termination of the Lease on the ground that

SDA had violated its terms by conducting prohibited commercial

operations on the Property (“Count I of the Counterclaim”). In

addition, Wong claimed an entitlement to damages based on SDA’s

breach of contract, its failure to comply with the conditions for

use, and its refusal to pay rent for its commercial operations

(“Count II of the Counterclaim”). He also claimed that SDA had

been unjustly enriched by its commercial operations on the

Property, and sought disgorgement of the profits therefrom

(“Count III of the Counterclaim”). Finally, he alleged that SDA

was obligated to defend and indemnify Wong for any loss or damage

in connection with the Lease (“Count IV of the Counterclaim”).

The parties each filed multiple motions for partial

summary judgment.3 With respect to Count I of the Complaint
3
The parties filed a total of nine summary judgment motions: (1)
[SDA’s] Motion for Partial Summary Judgment on Count I of the Complaint (Cabin
Rentals), filed July 28, 2005; (2) [SDA’s] Motion for Partial Summary Judgment
on Counts II and III of the Counterclaim (Percentage Rents), filed August 10,
2005; (3) [SDA’s] Motion for Partial Summary Judgment on Count I of the
Counterclaim (Termination), filed August 10, 2005; (4) [SDA’s] Motion for
Partial Summary Judgment on Counts I, II and IV of the Counterclaim (Failure
(continued . . . )
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(cabin rentals), the parties stipulated that the Lease is

unambiguous, parol evidence is inappropriate, and the court’s

interpretation should be limited to the four corners of the

agreement.

Wong argued that Paragraph 16 clearly prohibits use of

the Property by anyone other than faculty, administrative staff,

students, and employees. While maintaining that the Lease is

unambiguous, Wong cited letters and committee reports from School

representatives in support of his position that Paragraph 16

never contemplated rental of cabins to the public. He also

submitted deposition testimony from individuals who had been

involved in discussions regarding SDA’s use of the Property

before the Lease was finalized.

SDA, on the other hand, argued that permissible uses of

the Property include educational, agricultural, humanitarian,

recreational, or health care, and the Lease does not prohibit use

of the Property by the public for any of these permitted

purposes. It maintained that the parenthetical reference to

“vacation residence” provides an example of recreational use,
( . . . continued)
to Exhaust Administrative Remedies), filed August 25, 2005; (5) [SDA’s] Motion
for Partial Summary Judgment on Count IV of the Counterclaim (Indemnity),
filed August 25, 2005; (6) [Wong’s] Motion for Summary Judgment with Respect
to Count I of the Complaint, filed, August 17, 2005; (7) [Wong’s] Motion for
Summary Judgment with Respect to Counts II, III, IV, and VI of the Complaint,
filed August 17, 2005; (8) [Wong’s] Motion for Summary Judgment Based Upon
[SDA’s] Violation of the Lease, filed August 17, 2005; and (9) [Wong’s] Motion
for Partial Summary Judgment with Respect to Count VI of the Complaint, filed
August 24, 2005.

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while the subsequent reference to “dwellings” is a limitation

only as to those individuals who could permanently reside on the

Property. SDA argued that Wong improperly cited opinion evidence

from individuals who were neither involved in drafting the Lease

nor qualified to make legal conclusions regarding interpretation

of its terms. It contended that, if parol evidence were

considered, communications pertaining to the negotiation and

execution of the Lease expressly contemplated expansion of the

existing cabin rental operations to generate income for the

School.

With respect to Count I of the Counterclaim

(termination), Wong acknowledged that the law disfavors

forfeitures and that the Lease provides SDA thirty days to cure

any violation. Relying on Food Pantry v. Waikiki Business Plaza,

58 Haw. 606, 575 P.2d 869 (1978),4 and Aickin v. Ocean View

4
In Food Pantry, lessee sought a declaratory judgment regarding its
assignment and subleasing of the premises without prior written consent from
lessor, and lessor sought termination of the lease based on breach of a non-
assignment provision. 58 Haw. at 608, 575 P.2d at 873. The trial court
concluded that lessee had materially breached the lease, and lessor was
entitled to damages based upon the fair market rental for the premises; the
court, however, refused to terminate the lease as long as lessee cancelled the
assignments and subleases or, alternatively, paid a higher rental for the
remainder of the term. Id. at 613, 575 P.2d at 875.
On appeal, we held that the trial court was empowered to grant
equitable relief to relieve a party from forfeiture and the court had not
abused its discretion in refusing to terminate the lease. 58 Haw. at 613-14,
575 P.2d at 875-76 (“Equity does not favor forfeitures, and where no injustice
would thereby be visited upon the injured party, equity will award him
compensation rather than decree a forfeiture against the offending party.”).

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Investments Co., 84 Hawai#i 447, 935 P.2d 992 (1997),5 however,

he argued that the court should exercise its powers in equity to

terminate the Lease as a result of SDA’s willful violations. In

opposition, SDA contended that termination was inappropriate

under paragraph 26 of the Lease where, upon receiving written

notice from Wong, SDA timely cured any alleged violation by

ceasing its rental of cabins to the public.

With respect to Counts II and III of the Counterclaim

(breach of contract and unjust enrichment), Wong argued that SDA

violated the Lease by impermissibly renting cabins to the public

and he was therefore entitled to a remedy for such breach, either

in the form of reimbursement of revenues or disgorgement of

profits. SDA argued, inter alia, that relief for an alleged

breach was limited to the express terms of the Lease (i.e.,

notice and opportunity to cure, followed by termination); that a

5
In Aickin, tenants who failed to timely renew a commercial lease,
sought declaratory judgment restraining lessor from terminating the lease. 84
Hawai#i at 449-51, 935 P.2d at 994-96. After conducting a bench trial, the
circuit court concluded that tenants had materially breached the lease by
failing to timely exercise an option to extend, and lessor was entitled to
possession of the premises. Id. at 451-52, 935 P.2d at 996-97.
This court held that tenants were entitled to equitable relief if
they could show: (1) their conduct was not intentional, willful, or grossly
negligent; (2) lessor did not rely to its detriment on the failure to give
notice; (3) strict enforcement of the notice provision would result in
unconscionable hardship to tenants; and (4) the delay in giving notice was not
unreasonably long within the context of the lease itself. 84 Hawai#i at 455-
56, 935 P.2d at 1000-01. We noted that the lease had not yet expired when
tenants gave notice of their intent to renew, the four-month delay was not
unreasonably long in the context of a ten-year lease, and the failure to
timely exercise the option was an oversight; on this basis, we concluded that
the circuit court had abused its discretion by refusing to apply equitable
principles and extend the lease. Id. at 455, 935 P.2d at 1000.

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claim for percentage rents assumes the parties would have agreed

to such a clause at the time the Lease was signed; that the Lease

contained no provision for monetary damages; and that Wong did

not suffer any damages from the alleged breach.

After a hearing, the circuit court issued orders

granting summary judgment in favor of Wong on Counts I through IV

of the Complaint (cabin rentals, oral amendment, estoppel, and

injunctive relief), and granting summary judgment in favor of SDA

on Count VI of the Complaint (damages)6 and Counts I through IV

of the Counterclaim (termination, breach of contract, unjust

enrichment, and indemnification). The court did not elaborate on

the grounds for its decision, and SDA filed motions for

clarification and reconsideration. At a hearing on these

motions, the court explained that it had found no ambiguity in

the Lease and, therefore, had not considered parol evidence in

making its decision. It then denied both motions.

Wong then filed a motion for costs and attorneys’ fees.

SDA argued that Wong was not entitled to fees and costs because

it had prevailed on two of the four main issues before the court:

termination of the Lease and retroactive payment of percentage

rents. The circuit court concluded that Wong was entitled to

6
SDA had not moved for summary judgment on this count, and this
ruling appears to contradict the court’s ruling in favor of Wong on Count I of
the Complaint (vacation rentals). It appears that the circuit court
recognized this contradiction by later dismissing Count VI in its Amended
Final Judgment. See n.7, infra, and accompanying text.

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reasonable attorneys’ fees and costs because he had prevailed on

the disputed main issue in the Complaint (i.e., cabin rentals).

It therefore awarded Wong $60,270.00 in fees and $27,206.90 in

costs.

On May 21, 2007, the court entered its Amended Final

Judgment, disposing of all claims against the parties as follows:

granting summary judgment in favor of Wong on Counts I through IV

of the Complaint (cabin rentals, oral amendment, estoppel, and

injunctive relief); granting summary judgment in favor of SDA on

Counts I through IV of the Counterclaim (termination, breach of

contract, unjust enrichment, and indemnification); dismissing

Count VI of the Complaint (damages);7 awarding reasonable

attorneys’ fees and costs to Wong; and dismissing all claims and

counterclaims not specifically identified therein.

C. The ICA Opinion

SDA appealed the court’s judgment granting summary

judgment in favor of Wong on Count I of the Complaint (cabin

rentals), arguing, among other things, that rental of cabins to

the public is a permissible recreational use, and that the Lease

does not otherwise prohibit SDA from engaging in commercial

7
As the ICA notes, it is unclear why the court dismissed Count VI
of the Complaint (damages), even though it had earlier granted summary
judgment in favor of SDA, and there was no subsequent stipulation by the
parties or decision by the court. SDA, however, did not appeal this count.

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activities on the Property.8

Wong cross-appealed the court’s judgment granting

summary judgment in favor of SDA on Counts I, II, and III of the

Counterclaim (termination, breach of contract, and unjust

enrichment), arguing that he was entitled to terminate the Lease

because SDA’s rental of cabins to the public was a persistent and

willful material breach, and that he was entitled to monetary

damages as compensation for SDA’s improper use of the Property.

In a Memorandum Opinion dated April 16, 2012, the ICA

concluded that the Lease does not prohibit SDA from renting

cabins to the public as vacation residences. The ICA opined that

“[t]he first sentence of Paragraph 16 does not authorize or

exclude use of the Property by [SDA] or any particular class of

individuals” and “nothing in the text suggests that [SDA] is

prohibited from collecting revenue from the permissible use of

the Property.” While acknowledging that the second sentence of

Paragraph 16 limits the use of “dwellings” to faculty, staff,

students and employees of SDA, it concluded that this restriction

does not apply to use of the Property for “vacation residence,”

which is an expressly permitted recreational use. The ICA

concluded, however, that although it was undisputed that at least

some of the cabins were being used as vacation residences rather
8
Although the court also granted summary judgment in favor of Wong
on Counts II, III and IV of the Complaint (oral amendment, estoppel, and
injunctive relief), SDA did not appeal these portions of the court’s judgment.

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than permanent dwellings, the record contained very little about

what the cabins looked like, how they were used, and who used

them. Accordingly, the ICA concluded that it could not grant

summary judgment in favor of SDA, and remanded the case to the

circuit court for further proceedings on this issue.

The ICA affirmed the circuit court’s decision as to

the remaining counts of the Complaint and Counterclaim. It

concluded, inter alia, that termination of the Lease was not

warranted because SDA had cured any alleged breach by ceasing

cabin rentals to the public within thirty days of receiving

written notice from Wong, and that Wong was not entitled to

monetary damages because the circuit court had erred in

concluding that SDA’s cabin rentals were prohibited by the Lease.

Finally, the ICA vacated the order awarding attorneys’ fees and

costs to Wong because, in remanding the case to the circuit

court, a prevailing party had yet to be determined.

SDA then filed a motion for attorneys’ fees and costs.

On June 8, 2012, the ICA issued an order denying SDA’s request

for attorneys’ fees and granting its request for costs in the

reduced amount of $16,377.92. It concluded that SDA was not

entitled to attorneys’ fees because a prevailing party had yet to

be determined, but an award of costs was appropriate because SDA

had prevailed on appeal.

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D. Questions on Certiorari

Wong raises the following questions on certiorari:
A. Whether the ICA gravely erred in vacating the Circuit
Court’s grant of summary judgment in favor of Wong on Count
I of [SDA’s] Complaint seeking a declaratory judgment that
“continued operation of ‘Kahili Mountain Park’ and vacation
rental of the cabins . . . is permitted by the terms of the
lease.”

B. Whether the ICA gravely erred in affirming the Circuit
Court’s grant of summary judgment in favor of SDA on Count I
of Wong’s Counterclaim for termination of the lease on the
ground that [SDA] willfully violated Paragraph 16 of the
lease by renting cabins to the general public.

C. Whether the ICA gravely erred in affirming the Circuit
Court’s grant of summary judgment in favor of SDA on Counts
II and III of Wong’s Counterclaim seeking damages for breach
of contract and unjust enrichment, respectively.

D. Whether the ICA gravely erred by vacating the Circuit
Court’s Order Granting Fees and Costs and paragraph 4 of the
Amended Final Judgment awarding Wong attorneys’ fees and
costs.

III. Standard of Review

A motion for summary judgment is reviewed de novo,

viewing the evidence in the light most favorable to the non-

moving party, under the same standard applied by the trial court.

State v. Tradewinds Elec. Serv. & Contracting, 80 Hawai#i 218,

222, 908 P.2d 1204, 1208 (1995); Foytick v. Chandler, 88 Hawai#i

307, 313-14, 966 P.2d 619, 625-26 (1998). See also Hawai#i Rules

of Civil Procedure Rule 56.

“Summary judgment is appropriate if the pleadings,

depositions, answers to interrogatories, and admissions on file,

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together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving party

is entitled to a judgment as a matter of law.” Pacific Int’l

Serv. Corp. v. Hurip, 76 Hawai#i 209, 213, 873 P.2d 88, 92 (1994)

(citation omitted). “A fact is material if proof of that fact

would have the effect of establishing or refuting one of the

essential elements of a cause of action or defense asserted by

the parties.” Guajardo v. AIG Hawai#i Ins. Co., 118 Hawai#i 196,

201, 187 P.3d 580, 585 (2008) (citation omitted).

IV. Discussion

A. Count I of SDA’s Complaint (Cabin Rentals)

SDA and Wong both maintain that Paragraph 16 of the

Lease is unambiguous and enforceable.9 They disagree, however,

on the effect of Paragraph 16’s parenthetical reference to

“vacation residence” and the subsequent restriction on

“dwellings.” Wong contends that SDA’s rental of cabins to the

public violates the terms of the Lease because it constitutes use

of a dwelling by someone other than faculty, administrative

staff, students, and employees. SDA, on the other hand, argues

9
Wong nevertheless offers certain extrinsic evidence “to explain
and reinforce the unambiguous use provision in Lease.” SDA argues, however,
that Wong’s reliance on select pieces of inadmissible parol evidence is
misleading where the Lease is unambiguous and the proffered evidence does not
accurately reflect the intent of the parties at the time the Lease was
executed.

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that the use of cabins as vacation residences by the public is

expressly permitted as a recreational use and is distinguishable

from the use of permanent dwellings.

1. Principles of Contractual Interpretation

“[T]he construction and legal effect to be given a

contract is a question of law freely reviewable by an appellate

court.” Brown v. KFC National Mgmt. Co., 82 Hawai#i 226, 239,

921 P.2d 146, 159 (1996) (citations and internal quotation marks

omitted). “The determination whether a contract is ambiguous is

likewise a question of law that is freely reviewable on appeal.”

Id. (citations omitted).

Contract terms are interpreted according to their

plain, ordinary, and accepted sense in common speech. Cho Mark

Oriental Food v. K&K Intern., 73 Haw. 509, 520, 836 P.2d 1057,

1064 (1992). The court’s objective is “to ascertain and

effectuate the intention of the parties as manifested by the

contract in its entirety.” Brown, 82 Hawai#i at 240, 921 P.2d at

160 (citation and internal quotation marks omitted).

A contract is ambiguous when its terms are reasonably

susceptible to more than one meaning. Airgo v. Horizon Cargo

Transp., 66 Haw. 590, 594, 670 P.2d 1277, 1280 (1983).

As a general rule, the court will look no further than the four

corners of the contract to determine whether an ambiguity exists.
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State Farm Fire & Cas. Co. v. Pac. Rent-All, 90 Hawai#i 315, 324,

978 P.2d 753, 762 (1999) (noting that the parties’ disagreement

as to the meaning of a contract does not render it ambiguous).

The parol evidence rule “precludes the use of extrinsic evidence

to vary or contradict the terms of an unambiguous and integrated

contract.” Pancakes of Hawai#i v. Pomare Props. Corp., 85 Hawai#i

300, 310, 944 P.2d 97, 107 (App. 1997) (citation omitted). This

rule, however, is subject to exceptions that permit the court to

consider extrinsic evidence when the writing in question is

ambiguous or incomplete. Id. Where there is any doubt or

controversy as to the meaning of the language, the court is

permitted to consider parol evidence to explain the intent of the

parties and the circumstances under which the agreement was

executed. Hokama v. Relinc Corp., 57 Haw. 470, 476, 559 P.2d

279, 283 (1977). The court may admit parol evidence to explain

an ambiguity, whether latent or patent:
In determining whether or not an ambiguity exists in a document,
under the parol evidence rule, the test lies not necessarily in
the presence of particular ambiguous words or phrases but rather
in the purport of the document itself, whether or not particular
words or phrases in themselves be uncertain or doubtful in
meaning. In other words, a document may still be ambiguous
although it contains no words or phrases ambiguous in themselves.
The ambiguity in the document may arise solely from the unusual
use therein of otherwise unambiguous words or phrases. An
ambiguity may arise from words plain in themselves but uncertain
when applied to the subject matter of the instrument. In short,
such an ambiguity arises from the use of such words of doubtful or
uncertain meaning or application.

Hokama, 57 Haw. at 474-75, 559 P.2d at 282 (citations omitted)

(emphasis added).
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2. Paragraph 16's Use Provisions Are Ambiguous

As pointed out earlier, the parties stipulated that the

Lease is unambiguous. We note, however, that the parties’

stipulation as to a question of law is not binding on the court,

and does not relieve us from the obligation to review questions

of law de novo. Chung Mi Ahn v. Liberty Mut. Fire Ins. Co., 126

Hawai#i 1, 10, 265 P.3d 470, 479 (2011) (citations omitted).

The main issue before this court is whether Paragraph

16 of the Lease prohibits SDA’s practice of renting cabins, as

vacation residences, to members of the public not affiliated with

the Church or School. Paragraph 16 provides:
16. Use of Demised Premises. The demised premises shall be
used only for educational, recreation (including vacation
residence for members and staff of Lessee’s school and
church), agricultural, health care and humanitarian uses.
No dwellings shall be constructed or used on the demised
premises except for faculty, administrative staff, students
and employees. If Lessee ceases to use the demised premises
for the above purposes, Lessor shall have the right to
terminate this Lease.

Paragraph 16 begins by enumerating five permissible

uses of the Property. The first sentence states: “The demised

premises shall be used only for educational, recreation

(including vacation residence for members and staff of Lessee’s

school and church), agricultural, health care and humanitarian

uses.” Focusing on the parenthetical phrase in this sentence,

the ICA construed the word “including” as a term of enlargement,

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and concluded that the reference to vacation residence was

intended as an example of permissible recreational use rather

than a limitation thereof. In doing so, the ICA relied upon

Lealaimatafao v. Woodward-Clyde Consultants, 75 Haw. 544, 556-57,

867 P.2d 226, 224 (1994).

In Lealaimatafao, this court addressed the scope of the

wrongful death statute, which provided damages for “pecuniary

injury and loss of love and affection, including . . . loss of

parental care, training guidance, or education, suffered as a

result of the death of the person by . . . any person wholly or

partly dependent upon the deceased person.” 75 Haw. at 550-51,

867 P.2d at 223-24 (emphasis added). Citing a definition from

Black’s Law Dictionary 763 (6th ed. 1990), this court focused on

the term “including” and explained:
The term, “including” expresses “an enlargement and has the
meaning of and or in addition to, or merely specifies a
particular thing already included within the general words
theretofore used.” By using the term “including,” the
legislature intended the enumerated claims to be exemplary
of the type of claims which may be brought for the loss of
love and affection. The term “including” in no way implies
exclusivity. Thus it is irrelevant whether Appellants are
entitled to any of the enumerated claims inasmuch as they
have a general claim for the loss of love and affection.

75 Haw. at 556, 867 P.2d at 226 (brackets omitted).

Lealaimatafao involved statutory interpretation, not

contractual interpretation. More importantly, in Lealaimatafao,

this court relied upon only one of several definitions of the

term “including.” According to the definition from Black’s Law

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Dictionary, however, “including” can construed to express

limitation as well as expansion, and interpretation of that term

depends upon context. Black’s Law Dictionary 763 (6th ed. 1990)

(“‘Including’ within statute is interpreted as a word of

enlargement or of illustrative application as well as a word of

limitation.”). Thus, with respect to the first sentence of

Paragraph 16, the parenthetical reference could indicate a

limitation on how vacation residences may be used for

recreational purposes by a particular category of persons.

In addition, while Lealaimatafao involved statutory

construction, “expressio unius est exclusio alterius” is a

fundamental canon of contractual interpretation. See Edwin W.

Patterson, The Interpretation and Construction of Contracts, 64

COLUM. L. REV. 833, 853-55 (1964). Under this principle, the

express mention of a particular provision may imply the exclusion

of that which is not included. Tsunoda v. Young Sun Kow, 23 Haw.

660, 665 (Haw. Terr. 1917) (“A reservation or exception may be

implied from the language of the lease, although not expressly

mentioned, where the language used shows such intent.”

(Citations omitted.)).10 If the parties had intended to identify

vacation residence as an example of recreational use, they could

10
In Tsunoda, this court applied the rule “expressio unius est
exclusio alterius” and held that, where a lease contemplated the use of water
for irrigation of lands and lessee’s domestic purposes, the parties intended
to except any surplus water from operation of the lease. 23 Haw. at 665.

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have done so without referring to a particular category of

persons entitled to use those vacation residences.11 It is

therefore unclear whether the parenthetical phrase states a

limitation on who may use the Property as vacation residences,

and the sentence is particularly ambiguous when read in context.

The following sentence of Paragraph 16 states: “No

dwellings shall be constructed or used on the demised premises

except for faculty, administrative staff, students and

employees.” The ICA acknowledged that the term “dwellings” was

ambiguous insofar as it could refer broadly to a structure in

which people live (as Wong contends) or, more specifically, to a

place of primary or permanent residence (as SDA contends). It

concluded, however, that the term was unambiguous within the

context of the Lease.

Contract terms are interpreted according to their

plain, ordinary, and accepted sense in common speech. Cho Mark

Oriental Food, 73 Haw. at 520, 836 P.2d at 1064. Where terms are

undefined, the court may resort to legal or other well-accepted

dictionaries to determine their ordinary meaning. Sierra Club v.

Hawai#i Tourism Auth., 100 Hawai#i 242, 253, 59 P.3d 877, 888

(2002). The ICA noted that because vacation residence was a

permissible recreational use of the Property, it would be
11
Reading the parenthetical as the dissent does, without explaining
the import of this language, renders the reference “to members and staff of
Lessee’s school and church” superfluous.

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unnatural to read the subsequent restriction as a limitation

thereof, and “dwellings” must therefore be construed to mean

“primary, non-recreational residences” rather than temporary or

short-term vacation residences.

This analysis begs the question of whether a vacation

residence constitutes a type of dwelling which, absent the

parenthetical phrase, would be restricted to faculty,

administrative staff, students, and employees. Given this

ambiguity in the term “dwellings,” it is possible that Paragraph

16's restriction on the construction and use of “dwellings”

states the general rule, while the parenthetical reference to

“vacation residence” provides a limited exception thereto. Under

this interpretation, Paragraph 16 could reasonably be construed

to allow members and staff of SDA’s School and Church—including

those who might not be permitted to use dwellings—to use the

Property for short-term vacation residence, but to prohibit such

use by the general public.

The dissent suggests that interpreting “dwellings” to

encompass “vacation residence” would be illogical and

inconsistent. Dissent at 17-24. We respectfully disagree,

because the parenthetical phrase in the first sentence entitles a

broader subset of individuals to use the property for “vacation

residence” (i.e. members and staff of SDA’s school and church)

than those permitted to use “dwellings” (i.e., faculty,
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administrative staff, students, and employees). Further,

recognizing this ambiguity in the language of Paragraph 16 does

not frustrate otherwise permissible uses of the Property, because

any such limitation would apply only to the use of “dwellings,”

which are defined broadly as any structure in which a person

lives, a residence, or an abode. Black’s Law Dictionary 582 (9th

ed. 2009) (defining “dwelling-house”).

Thus, the terms of Paragraph 16 are reasonably

susceptible to more than one interpretation, there are genuine

issues of material fact regarding the intent of the drafters, and

summary judgment is therefore inappropriate. Although the ICA

correctly vacated summary judgment in favor of Wong and remanded

the case for further proceedings on the issue of cabin rentals,

it did so for the wrong reason.12 We vacate the ICA’s judgment

as to Count I of the Complaint (cabin rentals), and remand the

case to the circuit court for a determination of whether the

Lease permits SDA to use cabins as vacation residences for the

general public. In making this determination, the fact-finder

may consider additional evidence, including parol evidence,

regarding the intent of the parties at the time of drafting.

12
The ICA explained that there were disputed issues of material fact
as to whether cabins were used by SDA solely for the purpose of vacation
rentals. Insofar as Wong contended that SDA rented cabins to the public for
both long-term and short-term use, the ICA concluded that SDA had failed to
present sufficient facts to dispose of this claim on summary judgment.

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3. The Lease Does Not Prohibit Commercial Activities

Although our analysis of Paragraph 16 effectively

disposes of Wong’s questions on certiorari, we address several

additional arguments to provide guidance on remand.

Wong claims that the Lease prohibits SDA from engaging

in commercial uses of the Property, including renting vacation

residences to the public, because the five uses enumerated in

Paragraph 16 are all “non-commercial.” This argument, however,

lacks merit. A use that is educational, agricultural,

recreational or related to health care is not, by design, non-

commercial. A permissible recreational use does not cease to be

recreational simply because SDA charges a fee.13

Furthermore, neither Paragraph 16 nor the remainder of

the Lease expressly or implicitly prohibits SDA from conducting

commercial activities on the Property. If the parties had

intended to include such a prohibition, they could have easily

done so. Based on the plain language of the Lease, we conclude

that SDA is not prohibited from collecting revenue from otherwise

permissible uses of the Property.

13
As the ICA correctly explained: “Paragraph 16 plainly permits
[SDA] to use the Property to run a school, farm, or medical clinic. Whether
[SDA] charges students a tuition, sells the harvest, or charges patients fees
for the provision of medical treatment is merely derivative of and incidental
to these uses.”

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B. Count I of Wong’s Counterclaim (Termination)

Because the fact-finder could determine, on remand,

that Paragraph 16 of the Lease prohibits the use of cabins by the

general public, we must address whether Wong’s purported claim

for termination of the Lease was effective.

Wong contends that he was entitled to terminate the

Lease due to SDA’s “intentional, willful, or grossly negligent”

breach in renting cabins to the public. SDA, however, argues

that the Lease cannot be terminated because it timely cured any

alleged violations within thirty days of receiving written notice

from Wong.

Absent ambiguity, contract terms must be interpreted

according to their plain meaning. Cho Mark Oriental Food, 73

Haw. at 520, 836 P.2d at 1064. Under the terms of the Lease,

Wong possesses a right to terminate if SDA ceases to use the

Property for a permissible purpose. The right to terminate,

however, is subject to Paragraph 26, which provides SDA thirty

days within receipt of written notice to remedy any alleged

breach. It is undisputed that Wong first demanded SDA cease its

practice of renting cabins to the public in a letter dated March

6, 2002.14 SDA informed Wong that it would cease its vacation

14
There is some evidence that the Trusts were aware of SDA’s
practice of renting cabins to the public between 1984 and 2000. Prior to
Wong’s March 6, 2002 letter, however, there was no communication from the
Trusts that these rentals violated the terms of the Lease.

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rental operations on March 13, 2002. Under these circumstances,

SDA timely cured the alleged breach within the required time

frame and Wong was not entitled to terminate the Lease.

Wong’s reliance on Food Pantry, 58 Haw. at 613-14, 575

P.2d at 875-76, and Aickin, 84 Hawai#i at 455-56, 935 P.2d at

1000-01, is misplaced. Those cases recognized a policy against

forfeiture, despite lessors entitlement to terminate under the

express terms of a lease. As we explained in Food Pantry,

“[e]quity does not favor forfeitures, and where no injustice

would thereby be visited upon the injured party, equity will

award him compensation rather than decree a forfeiture against

the offending party.” 58 Haw. at 614, 575 P.2d at 876. In this

case, the express terms of the lease do not permit Wong to

terminate where SDA timely remedies an alleged breach within

thirty days of receiving written notice.

Thus, even if the fact-finder determines that SDA’s

vacation rentals violated the Lease, Wong was not entitled to

termination. We therefore affirm the ICA’s judgment in favor of

SDA on Count I of the Counterclaim.

C. Counts II and III of Wong’s Counterclaim
(Breach of Contract and Unjust Enrichment)

If, on remand, the fact-finder concludes that Paragraph

16 of the Lease prohibits the use of cabins by the general

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public, it will also have to address Wong’s claim that he is

entitled to an award of monetary damages for breach of contract

or disgorgement of profits from SDA’s rental operations.

SDA maintains that Wong is not entitled to damages

because the Lease does not contain a penalty provision, the court

cannot rewrite the terms of the Lease to require payment of

percentage rents, and it did not profit from its rental

operations because those funds were used to support the School.

SDA also argues that unjust enrichment is inappropriate as a

quasi-contract claim where there is a valid, enforceable contract

between the parties.

The ICA concluded that Wong could not seek damages or

disgorgement by virtue of the fact that he was not entitled to

termination of the Lease. A claim for breach of contract or

unjust enrichment, however, is distinct from a claim for

termination of the Lease.

A claim for breach of contract allows a party to

recover just compensation for any loss or damage that is the

natural and proximate consequence of an opposing party’s breach.

Amfac v. Waikiki Beachcomber Inv. Co., 74 Haw. 85, 128, 839 P.2d

10, 32 (1992). A claim for unjust enrichment permits a party to

seek restitution for benefits improperly conferred on an opposing

party as a result of a wrongful act. Porter v. Hu, 116 Hawai#i

42, 55, 169 P.3d 994, 1007 (App. 2007) (citing Durette v. Aloha
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Plastic Recycling, 105 Hawai#i 490, 100 P.3d 60 (2004)). In

deciding whether a party is entitled to restitution, the court is

guided by its objective to prevent injustice. Small v. Badenhop,

67 Haw. 626, 636, 701 P.2d 647, 654 (1985) (“One who receives a

benefit is of course enriched, and he would be unjustly enriched

if its retention would be unjust.” (Citation omitted.)).

If the fact-finder concludes that SDA violated the

Lease by renting cabins to the public, Wong may be entitled to an

award of monetary damages for breach of contract and/or equitable

relief in the form of disgorgement of profits from SDA’s rental

operations.15 Accordingly, we vacate the ICA’s judgment in favor

of SDA on Counts II and III of the Counterclaim, and remand the

case for further proceedings on these claims.

D. Attorneys’ Fees and Costs

In light of our decision that Paragraph 16 is

ambiguous, we conclude that neither party has prevailed on

appeal. Therefore, the ICA did not err in vacating the circuit

court’s order awarding attorneys’ fees and costs to Wong.

Because SDA has not prevailed on appeal, however, we vacate the

ICA’s order awarding costs to SDA. See Hawai#i Rules of

15
It is unclear why the circuit court granted summary judgment in
favor of SDA on Counts II and III of the Counterclaim, while granting summary
judgment in favor of Wong on Count I of the Complaint.

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Appellate Procedure Rule 39(a) (“[I]f a judgment is affirmed in

part and reversed in part, or is vacated, or a petition granted

in part and denied in part, the costs shall be allowed only as

ordered by the appellate court.”)

V. Conclusion

We conclude that the ICA correctly vacated summary

judgment in favor of Wong on Count I of the Complaint (cabin

rentals), but for the wrong reasons. The ICA also correctly

affirmed summary judgment in favor of SDA on Count I of the

Counterclaim (termination). However, in light of our decision to

remand the case on the permissibility of cabin rentals, we

conclude that the ICA erred in affirming summary judgment in

favor of SDA on Counts II and III of the Counterclaim (breach of

contract and unjust enrichment).

Finally, we conclude that the ICA correctly vacated the

circuit court’s order awarding attorneys’ fees and costs to Wong.

We also vacate the ICA’s order awarding costs on appeal to SDA

because a prevailing party has yet to be determined.

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We therefore affirm in part and vacate in part the

ICA’s judgment on appeal, and remand this case to the circuit

court for further proceedings consistent with this opinion.

Michael D. Tom, /s/ Mark E. Recktenwald
Lyle M. Ishida, and
David R. Harada-Stone /s/ Paula A. Nakayama
for petitioner
/s/ Sabrina S. McKenna
Michael R. Marsh,
James M. Cribley, and
Mark G. Valencia
for respondent

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