CLOG HOLDINGS v. BAILEY (2000)

This appeal is a consolidation of four appeals, Supreme Court Appeal Nos. 17792, 17854, 17899, and 18104, concerning the existence and location of an easement on property located in Nahiku, Maui, owned by George Harrison and Glenbrook Securities Corporation, S.A. (Glenbrook).   Harrison, Glenbrook, and Clog Holdings, N.V. (Clog) (collectively, Clog Parties), in Supreme Court No. 17792, appeal from the circuit court's orders granting summary judgment in favor of Scott Howard Whitney, Steven Philip Gold, Snapper Cay Acquisitions, Inc., a Florida Corporation (Snapper Cay), Ralph H. Waite, Beverly H. Waite, and Donna Ann Barnett (Barnett) (collectively, appellees) and against the Clog Parties.

On appeal, the Clog Parties contend that the circuit court erred when it ruled that:  (1) an easement existed allowing appellees access to the ocean over Harrison's and Glenbrook's property;  (2) the Clog Parties had notice of the easement prior to purchasing the property;  (3) the Clog Parties were not bona fide purchasers and acquired the property subject to the easement because they had notice of the easement;  (4) the creation of the easement was not void under the Maui Subdivision Ordinance;  (5) the doctrine of merger did not extinguish the easement;  and (6) the metes and bounds description of the easement was ambiguous, allowing the circuit court to use its equitable powers to determine the specific location of the easement.

Whitney, Gold, and Snapper Cay, in Supreme Court No. 17854, appeal from the circuit court's orders granting summary judgment in favor of the Clog Parties and against appellees.   Whitney, Gold, and Snapper Cay contend that the circuit court erred when it held that:  (1) Whitney, Gold, and Snapper Cay did not have a claim for punitive damages against the Clog Parties for interference with the use of the easement;  and (2) the metes and bounds description of the easement was ambiguous, allowing the circuit court to use its equitable powers to determine the specific location of the easement.

Ralph H. Waite and Beverly H. Waite (collectively, the Waites) and Barnett, in Supreme Court No. 17899, appeal from the circuit court's order granting summary judgment in favor of the Clog Parties and against the appellees and the circuit court's order denying the Waites' and Barnett's motion to amend the circuit court's order granting summary judgment.   The Waites and Barnett contend that the circuit court erred when it held that:  (1) the metes and bounds description of the easement was ambiguous, allowing the circuit court to use its equitable powers to determine the specific location of the easement;  and (2) the Clog Parties were not responsible for the construction and maintenance of the easement.

I. BACKGROUND

A. THE PARTIES

This case involves ocean cliff property in the N‘ahiku Homesteads, situated in N‘ahiku, District of Ko‘olau, Island and County of Maui, State of Hawai‘i.   It involves three parcels of land, Maui Tax Map Key Nos. (2) 1-2-3:  12 (Parcel 12), (2) 1-2-3:  48 (Parcel 48), and (2) 1-2-3:  49 (Parcel 49).

The owners of Parcel 12 and their respective undivided interests are as follows:  Snapper Cay (50 percent), Whitney (23.7 percent), Gold (12.5 percent), Barnett (12.5 percent), and Douglas William Rothaus (1.3 percent).   The owners of Parcel 48 and their respective undivided interests are as follows:  Ralph H. Waite (50 percent) and Beverly H. Waite (50 percent).   The owners of Parcel 49 are Harrison and Glenbrook.   Harrison owns a two-thirds undivided interest in Parcel 49, while Glenbrook owns the remaining one-third undivided interest.

The sellers of Parcels 12 and 48 were John V. and Gordean L. Bailey (the Baileys).   The seller of Parcel 49 was Bailey Farms, a Hawai‘i general partnership.   The Baileys were the sole partners of Bailey Farms.

B. HISTORY OF THE N‘AHIKU PROPERTY

In 1976, the Baileys divided their N‘ahiku property, known as Lot 16, into three lots, re-identified as Parcels 12, 48, and 49.²  Parcels 12 and 48 were located mauka (to the south) of the government road that ran east-west across Lot 16, while Parcel 49 was located makai (to the north) of the government road.   Parcel 49 bordered the ocean cliffs and contained all the shoreline property originally contained in the old Lot 16.   The Baileys conveyed Parcels 12 and 48 to themselves and Parcel 49 to Bailey Farms.   The Baileys intended to sell some or all of the parcels of land.

Prior to the sale of any of the parcels, the Baileys decided to create a ten-foot-wide pedestrian access easement (easement) across Parcel 49 in favor of the mauka parcels, Parcels 12 and 48.   The easement was to begin at the government road, and run in a north-south (mauka-makai) direction along the eastern border of Parcel 49 above and adjacent to the Hianaulua Gulch (Gulch) to the seaward side of Parcel 49 closest to Kapukaulua Point (Point).   The Point offered fishing opportunities as well as scenic views of and actual access to the ocean.   The Gulch ran north-south along the eastern border of Parcel 49, and served as a physical and geographic constraint that divided Parcel 49 from lands on the eastern side of the Gulch.   The easement was to be located as close as possible to the eastern edge of Parcel 49 in order to minimize the impact of the easement on the use and enjoyment of Parcel 49.   The Baileys erroneously believed at the time that the easternmost boundary of Parcel 49 was the top and not the center of the Gulch.

The Baileys had two reasons for creating the easement.   The first was a marketing strategy to enhance the value and selling potential of Parcels 12 and 48.   Access to the Point and the ocean would be an important selling point that would maximize the value of the mauka parcels.   Second, the Baileys wanted to ensure access to the ocean via the easement for themselves in the event they sold Parcel 49 and retained ownership of one of the remaining parcels.

In 1977, the Baileys retained Randall Sherman, a licensed surveyor, to prepare precise metes and bounds descriptions for Parcels 12, 48, and 49 and to survey and create a metes and bounds description for the easement.   Sherman subsequently determined the site of a ten-foot wide easement on Parcel 49, starting from the government road and proceeding across Parcel 49 to the Point.   Sherman reduced this physical survey to a metes and bounds description (Sherman Survey).

C. THE BAILEYS SELL PARCELS 12 AND 48

Thereafter, the Baileys retained Leslie Agorastos of the Earl Thacker Realty Company to assist them in the sale of all of their properties.   Agorastos subsequently represented the Baileys and Bailey Farms in the sale of all three parcels.

In 1978, the Baileys sold Parcel 48 to Ralph H. Waite in an agreement of sale dated March 28, 1978 (the Parcel 48 A/S).   Mr. Waite eventually conveyed a fifty percent undivided equitable interest in Parcel 48 to Beverly H. Waite, his ex-wife, by sub-agreement of sale dated August 15, 1981.

By an agreement of sale dated August 7, 1978 (the Parcel 12 A/S), the Baileys sold Parcel 12 to a hui (cooperative) composed of Gold (25 percent undivided interest), Whitney (25 percent undivided interest) and Robert Friedlander (50 percent undivided interest).   Friedlander sold his 50 percent undivided interest to Snapper Cay in an assignment of agreement of sale dated January 21, 1983.   Gold conveyed a 12.5 percent undivided interest in Parcel 12 to Barnett by a quitclaim deed dated September 20, 1979.   Whitney conveyed a 1.32821 percent undivided interest in Parcel 12 to Rothaus by an assignment of agreement of sale dated February 17, 1982.

Paragraph 32 of both the Parcel 12 A/S and the Parcel 48 A/S, entitled “GRANT OF EASEMENT,” appeared to grant a perpetual ten-foot easement to the ocean over Parcel 49.   Paragraph 32 provided:

32.  GRANT OF EASEMENT.   Seller further agrees that Purchaser shall have a perpetual non-exclusive ten foot right and easement for ingress and egress to and from the ocean over, across, along, upon and through those certain premises owned by Seller and more particularly described in Exhibit “B”[.]

Exhibit “B” was the Sherman Survey and described the easement that the Baileys intended to create over Parcel 49.   Exhibit “B” provided:

EXHIBIT “B”

SUBJECT, HOWEVER, to Easement 1 (10-feet wide) over and across the Northerly portion of Lot 16 (Grant 4579 to Jacinth d'Estrella) of the Nahiku Homelands (H.T.S. Plat 1014), for pedestrian access purposes, and more particularly described as follows[.]

Following this paragraph was a description of the easement using the twenty course metes and bounds description of the Sherman Survey.

D. HARRISON BUYS PARCEL 49

Sometime in late 1978 or early 1979, Harrison visited Maui, and Agorastos showed him Parcel 49.   Agorastos testified that she informed Harrison that there was a pedestrian easement in favor of the mauka parcels on the eastern side of Parcel 49 near the Gulch.   Harrison testified that he did not recall having this conversation.   Harrison expressed interest in purchasing Parcel 49.

In June or July 1979, Agorastos prepared a deposit, receipt, offer, and acceptance (DROA) for a company called EuroAtlantic Ltd. (EuroAtlantic) ³ to purchase Parcel 49 from the Baileys.   The DROA also conveyed Parcel 51, an adjacent parcel of land owned individually by the Baileys.   The DROA stated that Parcel 49 was subject to a pedestrian easement along the northerly end of the property ⁴ in favor of Parcels 12 and 48:

2.  PROPERTY DESCRIPTION

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(c) Title:  Seller agrees to convey the property with warranties vesting marketable title in the buyer, free and clear of all liens and encumbrances except 10 foot pedestrian easement at the northerly end of property in favor of Parcels 12, 13, & 48 and any covenants, easements, reservations, restrictions now of record which do not materially affect the value of the property.

(Emphasis added.)

On July 9, 1979, Denis O'Brien executed the DROA on behalf of EuroAtlantic.   Subsequently, EuroAtlantic assigned its interest in the property to Glenbrook, Clog, and John M. Calley (Calley), each with a one-third undivided interest.

The Clog Parties hired Lawyers Title Insurance Company (Lawyers Title) to conduct a title search and issue a title policy.   Lawyers Title conducted the search and issued a preliminary report and a title insurance policy indicating that both Parcels 49 and 51 were free and clear of any encumbrances.   The title search did not uncover the Parcel 12 A/S or the Parcel 48 A/S regarding the easement.

The agreements of sale for Parcels 49 and 51 (the Parcels 49/51 A/S) were entered into on October 15, 1979, Bailey Farms (Parcel 49) and the Baileys (Parcel 51) being the sellers and Clog, Glenbrook, and Calley being the buyers.   Paragraph 27 of the Parcels 49/51 A/S, entitled “CERTIFICATE OF TITLE,” warranted that Bailey Farms would deliver Parcel 49 as marketable title “free from any and all liens and encumbrances” other than those specifically mentioned.   The Parcels 49/51 A/S did not contain either Paragraph 32, mentioning the grant of an easement, or Exhibit “B,” containing the Sherman Survey description of the Easement.   No encumbrance, such as an easement or a right to use an easement, was mentioned in the Parcels 49/51 A/S.

Calley conveyed his one-third interest in Parcels 49 and 51 to Clog by assignment of agreement of sale, dated October 19, 1981.   Clog then conveyed its two-thirds undivided equitable interest to Harrison by an unrecorded agreement of sale dated November 10, 1981.   Glenbrook still holds title to the remaining one-third undivided interest in Parcels 49 and 51.

In the latter part of 1982, Harrison completed construction of a house in the northeastern portion of Parcel 49, overlooking the Point and near the easement.   At its closest point, the house is approximately 100 feet from the easement.

In 1983, Snapper Cay, Gold, and Whitney made the final payment under their agreement of sale to the Baileys, and a “Compliance Deed” was recorded for Parcel 12 (Compliance Deed).   The Compliance Deed gave legal title to Parcel 12 to Snapper Cay, Gold, and Whitney, but it made no mention of the Easement or any other encumbrance.   Like the Parcels 49/51 A/S, the Compliance Deed contained neither Paragraph 32 nor Exhibit “B.”

In 1990, after the present litigation commenced, a purported “Correction Deed” was recorded by the Baileys, which attempted to correct the Compliance Deed by granting an easement over Parcel 49 (Correction Deed).   The Correction Deed stated that there was an easement over Parcel 49 in favor of Parcels 12 and 48 and included Exhibit “B”. In return for the Correction Deed, Whitney and Gold agreed in writing not to sue the Baileys for damages resulting from the Parcel 12 A/S or the Compliance Deed.

E. COURT PROCEEDINGS

On May 2, 1990, the Clog Parties filed a complaint in Civil No. 90-0252(1) against Bailey Farms and the Baileys, seeking, inter alia, specific performance of Bailey Farms' warranty to convey Parcel 49 free and clear of any encumbrances, specifically, the easement.

Eight months later, on January 7, 1991, Gold and Whitney filed a complaint in Civil No. 91-003(3) against the Clog Parties, the Baileys, and Bailey Farms, seeking, inter alia, compensatory and punitive damages for interference with the use of the easement and a judgment declaring that Parcel 49 was burdened by a pedestrian access easement.

The two cases were consolidated when the circuit court granted the Clog Parties' motion, filed on January 2, 1992, to consolidate the cases.   This order consolidated Civil Nos. 90-252(1) and 90-0252(3) and added Snapper Cay, Barnett, Rothaus, and the Waites (collectively, Third-Party Defendants) as additional parties to the case.   After the Third-Party Defendants joined the case, the Clog Parties filed a third-party complaint for declaratory relief on March 11, 1992 (Third-Party Complaint), seeking a judgment declaring that Third-Party Defendants had no right to use the easement.

Third-Party Defendants, in their individual answers to the Third-Party Complaint, asserted several counterclaims against the Clog Parties, seeking a judgment declaring that:  (1) the easement existed and that they had an interest in it;  and (2) they were entitled to compensatory and punitive damages for being deprived the use of the easement.

On May 7, 1993, the Clog Parties filed a motion for partial summary judgment on the issue of Whitney and Gold's claim for punitive damages.   This motion was granted by order filed June 24, 1993 (Gold and Whitney Punitive Damages Order).   The Clog Parties filed a similar motion on June 2, 1993 for partial summary judgment against Snapper Cay with respect to Snapper Cay's claim for interference with the easement.   Snapper Cay alleged that the Clog Parties had interfered with their use of the easement and that they were entitled to punitive damages.   By order filed July 12, 1993 (Snapper Cay Punitive Damages Order), the circuit court granted the Clog Parties' motion for summary judgment on the punitive damages claim, but denied it on the issue of interference with the easement.   Whitney, Gold, and Snapper Cay appeal these orders denying their claims for punitive damages for Clog's alleged interference with the easement.

On June 18, 1993, the Clog Parties filed a motion for summary judgment to preclude all claimants from asserting that the Baileys and/or Bailey Farms conveyed the alleged pedestrian easement over and across Parcel 49 by way of an express grant.   Specifically relevant to this appeal, they argued that the Baileys could not convey the easement across Parcel 49 in their own name and that the easement could only be conveyed in the name of the partnership, Bailey Farms.   On July 2, 1993, the Clog Parties filed a motion for summary judgment declaring that the easement was invalid under the Maui County Code (MCC).   Both motions were denied.

Specifically relevant to the MCC motion, the circuit court gave the following reasons for denying the motion:

If there's anything-I just don't think the failure to follow that subdivision ordinance necessarily renders everything void.   I think there's a problem with the clarity of the ordinance.   I'm not sure it's plain here that there is an access easement in the meaning of the ordinance.   I think the ordinance must be construed in accordance with its purpose, which is to insure that access to public facilities and utilities is taken into account.   Here we're talking about a pedestrian easement which gives access only to the ocean and I don't think it can be selectively applied here as well.   So I'm inclined to deny that.

One week before trial, on July 12, 1993, Whitney, Gold, and Snapper Cay filed a motion for partial summary judgment concerning the existence of the easement.   Barnett and the Waites filed a motion for partial summary judgment on the same issue.   At the hearing on July 15, 1993, the circuit court orally granted the motions, determining that the easement existed and that the Clog Parties were not bona fide purchasers because the Clog Parties had notice of the easement in their DROA. The circuit court entered an order granting Whitney, Gold, Snapper Cay, Barnett, and the Waites' motions for partial summary judgment on November 22, 1993, but entered the pertinent findings of fact and conclusions of law on February 3, 1994 (February 3, 1994 Order),⁵ emphasizing that its decision was pertinent only to the existence of the easement and that there were disputed issues of fact regarding the location of the easement that were to be determined at a non-jury trial.

The non-jury trial commenced on July 19, 1993.   The court determined that the easement's location according to the Sherman Survey was ambiguous and directed the parties to retain a surveyor to create a metes and bounds description of the easement's exact location.   The parties could not agree on a final location, and the circuit court, using its equitable powers, created a new easement along the eastern boundary of Parcel 49 which differed slightly from the Sherman Survey.   The circuit court entered its findings of fact and conclusions of law regarding the location of the easement on November 22, 1993 (November 22, 1993 Order).   The November 22, 1993 Order reiterated that the easement existed and determined that the Sherman Survey's description of the easement was not in accord with the Baileys' intent to create an easement over Parcel 49 because:  (1) the last point on the Sherman Survey stopped approximately 35 feet short of the seaward boundary, thus failing to provide access to the Point;  (2) at two points on the Sherman Survey, the path traversed two rocky outcroppings or ledges which were difficult to pass on foot and which could be easily avoided by moving the easement;  and (3) the easement was not as close to the Gulch as feasible.   The circuit court also decided that by exercising its equitable power,, it could position the location of the easement and create a new easement closer to the Gulch, which avoided the two rocky outcroppings.   The Clog Parties, Gold, Whitney, and Snapper Cay, the Waites and Barnett each appeal the circuit court's exercise of its equitable powers to relocate the easement.

On December 2, 1993, the Waites and Barnett moved to amend the November 22, 1993 Order so that the Clog Parties would be responsible for constructing and maintaining all portions of the easement.   The circuit court denied this motion in its order filed January 10, 1994 (Construction and Maintenance Order).

The Clog Parties, in Supreme Court No. 17792, timely appealed, contending that the circuit court erred when it issued the following orders:  (1) the November 22, 1993 Order;  (2) the Subdivision Ordinance Order;  (3) the Grant of Easement Order;  (4) the Merger Order;  and (5) the February 3, 1994 Order.

Whitney, Gold, and Snapper Cay, in Supreme Court No. 17854, timely appealed, contending that the circuit court erred when it issued the following orders:  (1) the Gold and Whitney Punitive Damages Order;  (2) the Snapper Cay Punitive Damages Order;  and (2) the November 22, 1993 Order.

The Waites and Barnett, in Supreme Court No. 17899, timely appealed, contending that the circuit court erred when it issued the following orders:  (1) the November 22, 1993 Order;  and (2) the Construction and Maintenance Order.

Rothaus, in Supreme Court No. 18104, appealed, contending that the circuit court erred when it issued the following orders:  (1) a December 28, 1993 order granting partial summary judgment in favor of the Clog Parties and against Rothaus on his request for punitive damages;  (2) a July 20, 1993 entry of default;  (3) an October 28, 1993 order partially denying setting aside the entry of default, and (4) a May 26, 1994 order denying determination of Rothaus's status as a third-party defendant.

Whitney, Gold, and Snapper Cay filed a motion for consolidation of appeals on April 3, 1994, seeking to consolidate Nos. 17792, 17854, and 17899 under No. 17792.   We granted this motion on April 19, 1994.   The Clog Parties moved to have Nos. 17792 and 18104 consolidated under No. 18104.   We granted this motion on July 21, 1994.   On September 7, 1994, we limited the scope of the appeal, noting that we lacked jurisdiction to review the circuit court's three interlocutory orders, with respect to punitive damages, dated June 24, 1993, July 12, 1993 and December 29, 1993.   We dismissed Rothaus's appeal for want of appellate jurisdiction in our order of partial dismissal, filed September 12, 1994.

II. STANDARD OF REVIEW

This court reviews a circuit court's award of summary judgment de novo under the same standard applied by the circuit court.  Maguire v. Hilton Hotels Corp., 79 Hawai‘i 110, 112, 899 P.2d 393, 395 (1995).

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories, and admissions on file, 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.   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.

Id. (Citation, emphasis, internal quotation marks, and original brackets omitted) (emphasis added).   See Hawai‘i Rules of Civil Procedure (HRCP) Rule 56(c).

We view the materials on file in the light most favorable to the nonmoving party.   The moving party has the burden of demonstrating the absence of a genuine issue of fact for trial.   If the moving party satisfies this burden, the opponent must set forth specific facts showing that there remains a genuine issue for trial.   However, no defense to an insufficient showing is required.

Great Hawaiian Financial Corp. v. Aiu, 863 F.2d 617, 619 (9th Cir.1988) (citations omitted).

III. DISCUSSION

A. THE EXISTENCE OF THE EASEMENT

The Clog Parties set forth six independent grounds for reversing the circuit court's grant of summary judgment in favor of Whitney, Gold, Snapper Cay, the Waites, and Barnett, determining that an easement exists across Parcel 49 (February 3, 1993 Order).   We address each point as follows and affirm the circuit court's grant of summary judgment declaring the existence of an easement across Parcel 49 in favor of Parcels 12 and 48.

1. The Clog Parties Are Not Entitled to the Defense of Laches.

The Clog Parties argue that the doctrine of laches bars Whitney, Gold, Snapper Cay, the Waites, and Barnett from asserting their claims to the easement because they waited ten years after they knew of Harrison's plans to build his home near the easement to assert their claims.   They contend that “[d]espite that undisputed knowledge, Respondents allowed appellants to spend money and incur the effort to place the house in a position where they supposedly knew they had an easement.   They then waited 10 more years before asserting any claim.   During that time, appellants continued to improve their property.”   The Clog Parties essentially contend that the claimants should have asserted their claim to the easement when they knew of Harrison's plans to build his house near the easement, and before the house was completed in 1982.   Because the appellees did not assert their claim at this time, the Clog Parties argue that they suffered prejudiced in spending the money to complete the house near the easement.   This argument is without merit.

“ ‘There are two components to laches, both of which must exist before the doctrine will apply.   First there must have been a delay by the plaintiff in bringing his claim, and that delay must have been unreasonable under the circumstances.’ ”  Uncle John's of Hawaii v. Mid-Pacific Restaurants, 71 Haw. 412, 417, 794 P.2d 614, 617 (1990) (quoting Adair v. Hustace, 64 Haw. 314, 321, 640 P.2d 294, 300 (1982)).  “Lapse of time alone does not constitute laches.   Since laches is an equitable defense, its application is controlled by equitable considerations.”  Yokochi v. Yoshimoto, 44 Haw. 297, 300, 353 P.2d 820, 823 (1960).  “Delay is reasonable if the claim was brought without undue delay after plaintiff knew of the wrong or knew of facts and circumstances sufficient to impute such knowledge to him,” Adair, 64 Haw. at 321, 640 P.2d at 300.

Pelosi v. Wailea Ranch Estates, 91 Hawai‘i 478, 490-91, 985 P.2d 1045, 1057-58 (1999).

The construction of Harrison's house is not a fact or circumstance that would have placed the claimants on notice that their right to use the easement was in jeopardy.   Indeed, the claimants used the easement without incident until the house was completed in 1982.   It was only after the house had been completed that Harrison began objecting to the claimants' use of the easement by confronting them as they crossed his property.   Therefore, the claimants were not aware that their right to use the easement was in jeopardy while Harrison was building his house, and they had no duty to bring a claim prior to its completion.

Once the claimants were notified of Harrison's objections to the easement in 1982, however, the Clog Parties contend that they should not have waited until 1992 to assert their claim to the easement.   As a result, the Clog Parties claim that they suffered prejudice by expending money to improve the property during this ten year period.   This argument is likewise without merit.   Although the claimants waited ten years to assert a legal claim to the easement, Harrison was not without notice of their claim to the easement.   Indeed, the claimants made known to Harrison their right to use the easement during several of their confrontations with Harrison while they crossed the easement, and there is evidence in the record that Harrison had notice that an easement existed across his property prior to the construction of his house.

Furthermore, the Clog Parties fail to show how this ten year delay prejudiced them.   As we have noted, “[l]apse of time alone does not constitute laches.   Since laches is an equitable defense, its application is controlled by equitable considerations.”  Yokochi, 44 Haw. at 299, 353 P.2d at 823.   Moreover, such a lapse of time or “delay must have resulted in prejudice to the defendant.”  Nishitani v. Baker, 82 Hawai‘i 281, 287, 921 P.2d 1182, 1188 (App.1996).   The Clog Parties only assert that they suffered prejudice in expending money to improve the property.   This is not the kind of prejudice contemplated by the laches doctrine.  “Common but by no means exclusive examples of such prejudice are loss of evidence with which to contest plaintiff's claims, including the fading memories or deaths of material witnesses, changes in the value of the subject matter, changes in defendant's position, and intervening rights of third parties.”  Id. Accordingly, the doctrine of laches does not bar the claimants' claim to the easement.

2. The Clog Parties Are Not Entitled to the Defense of Equitable Estoppel.

The Clog Parties argue in the alternative that the Baileys and the Waites are estopped from asserting that the Clog Parties do not have clear title to Parcel 49.   They contend that this contention is erroneous because they relied on recorded documents that made no reference to any easement.

“A party seeking to invoke equitable estoppel must show that it has detrimentally relied on the representation of the party sought to be estopped and that the reliance was reasonable.”  Federal Home Loan Mortgage Corp. v. Transamerica Ins. Co., 89 Hawai‘i 157, 166, 969 P.2d 1275, 1284 (1998) (citation omitted).   Thus, the party invoking the doctrine bears the burden of proof.  GGS Co., Ltd. v. Masuda, 82 Hawai‘i 96, 102, 919 P.2d 1008, 1014 (App.1996) (citations omitted) (emphasis in original).   Here, the record fails to reveal that the Baileys made any representations to the Clog Parties on which they detrimentally relied.   Accordingly, the Clog Parties' reliance on this defense is misplaced.

3. The Clog Parties Were Not Bona Fide Purchasers for Value without Notice.

The Clog Parties next argue that the circuit court erred in concluding that they had notice of the easement.   In its February 3, 1994 Order deciding that an easement exists across Parcel 49, the circuit court entered the following relevant findings of fact and conclusions of law:

5.   The Clog DROA contains a specific reference in it to a “10 foot pedestrian easement at the northerly end of [the] property in favor of parcels 12, 13 and 48.”

․

6.   As reflected in the Clog DROA, the Waite Agreement of Sale, the Whitney Agreement of Sale, the statements of the Baileys, and the statements of the Baileys' realtor, Leslie Agorastos, the Baileys intended to create a pedestrian access easement across Parcel 49 in favor of Parcel 12 and Parcel 48.

․

9.   Dennis O'Brien, who was an attorney, and who represents the Clog parties, had notice of the Easement through the Clog DROA.

10.  Martin Luna, who was an attorney who represented the Clog Parties, and who prepared the Clog Agreement of Sale, had notice of the Easement through the Clog DROA.

11.  Although title to Parcel 49 was in the name of Bailey Farms, the vendors under the Clog Agreement of Sale were both the Baileys individually and Bailey Farms.

12.  If a title search had been made of the grantor index from the Baileys, the Waite Agreement of Sale and the Whitney Agreement of Sale would have been found immediately.

13.  The Clog Parties failed to make any inquiry into the existence of the Easement based on the disclosure contained in the Clog DROA.

On the basis of the undisputed foregoing Findings of Fact, the Court concludes as a matter of law that:

․

3.  The Clog DROA contained sufficient facts to put the Clog Parties on notice of the existence of the Easement.

4.  Having been put on notice of by [sic] the Clog DROA, the Clog Parties had a duty to make a reasonable inquiry into the existence of the Easement.

5.  The Clog Parties failed to make a reasonable inquiry into the existence of the Easement.

6.  As a result, the Clog Parties are not bona fide purchasers without notice of the existence of the Easement.

7.  Because the Clog Parties are not bona fide purchasers without notice, the Clog Agreement of Sale cannot cut off the rights of the owners of Parcels 12 and 48 to the Easement.

The Clog Parties contend that, contrary to these findings and conclusions, they were bona fide purchasers for value who purchased the property without notice of the easement because the easement did not appear in their title search of Parcel 49 under “Bailey Farms.”   They claim that they had no duty to search the chains of title on other parcels that the Baileys personally might have owned, i.e., Parcels 12 and 48, and they did not have even constructive notice of the easement.   Thus, the easement rights of the dominant parcel cannot be enforced against them.   We disagree and hold that the Clog Parties had actual notice of the easement derived from the language contained in their DROA, and, as such, they were placed on inquiry notice with respect to the information contained in the agreements of sale for Parcels 12 and 48.

Actual notice is “direct positive knowledge of [a] fact in question or information sufficient to put a prudent person on inquiry as to such fact.   Actual notice embraces those things of which one has express information and which reasonably diligent inquiry would have disclosed.”   Barron's Law Dictionary, 325 (3d ed.1991) (emphasis added);  see also Bowen v. Perryman, 256 Ark. 174, 506 S.W.2d 543, 547 (1974);  Diversified Equities, Inc. v. American Savings and Loan Assoc., 739 P.2d 1133, 1136 (Utah App.1987);  Hunt Trust Estate v. Kiker, 269 N.W.2d 377, 381-82 (N.D.1978).

As applied to conveyances, actual notice occurs when “a party dealing with the land has information or facts which would put a prudent person upon an inquiry which, if pursued, would lead to actual knowledge as to the state of the title.”  Diversified Equities, Inc., 739 P.2d at 1136.   Furthermore, “[s]ufficient notice to incite attention, put a party on guard, and call for inquiry, is notice of everything to which the inquiry might lead and whenever one has sufficient information to lead him to a fact, he shall be deemed conversant with it.”  Bowen, 506 S.W.2d at 547.  “The rule is ‘[n]otice of facts putting a man of ordinary prudence on inquiry is tantamount to knowledge of the facts to which the inquiry might lead.’ ”  Id.

Here, the Clog Parties' DROA contained the following language describing the easement across Parcel 49:

2.  PROPERTY DESCRIPTION

․

(c) Title:  Seller agrees to convey the property with warranties vesting marketable title in the buyer, free and clear of all liens and encumbrances except 10 foot pedestrian easement at the northerly end of property in favor of Parcels 12, 13, & 48 and any covenants, easements, reservations, restrictions now of record which do not materially affect the value of the property.

(Emphasis added.)   The DROA was prepared by the Clog Parties' real estate agent, Ms. Agorastos,⁶ and signed by Denis O'Brien (O'Brien) on behalf of EuroAtlantic, Inc.⁷ O'Brien, an attorney, is held to a higher standard than the average purchaser's agent, and as such, is presumed to have read and understood the DROA as submitted by Agorastos prior to signing the document.   Under these facts, the Clog Parties had actual notice of the easement from the language contained in their own DROA.

Having actual notice of the easement, the Clog Parties then had a duty to further inquire into the facts surrounding the easement.   Because the descriptive language in the DROA was drafted by Agorastos and specifically identified Parcels 12, 13, and 48 as the dominant properties, any reasonable effort to ascertain the existence of the easement should have included a check of the agreements of sale for Parcels 12, 13, and 48.  “A duty of inquiry requires the party to make inquiry and to diligently do that which the answer to the inquiry reasonably prompts.”  Diversified Equities, Inc., 739 P.2d at 1137.

Furthermore, the title search of Parcel 49, rather than clarifying the existence of the easement, raised a discrepancy between the information the buyers possessed (i.e., the information in the DROA that an easement existed across Parcel 49 and that the Baileys individually were the vendors of both Parcel 49 and 51) and the information in the title search that apparently revealed no easement.   The discrepancy between the DROA and the title search highlights the obligation of the escrow company to harmonize the requirements of the DROA with the closing documents.   Apparently, the disclosure of the easement in the DROA was disregarded in preparation of the closing documents, thereby exacerbating an already confusing transaction.

In addition, the Baileys personally accepted the Clog Parties' offer by signing the DROA individually as John and Gordean Bailey, and not as partners of the Bailey Farms partnership.   In fact, there is no mention of Bailey Farms anywhere in the DROA. Thus, any reasonable inquiry would indicate that the Baileys, as individuals, were selling both parcels.   Once again, escrow appears to have reconciled the discrepancy in legal ownership without reference to the DROA.

It was unreasonable to disregard these discrepancies in the documents simply because a limited title search failed to reveal the easement.   Rather, the discrepancies should have prompted the escrow company to notify the parties to conduct an in-depth investigation to ascertain the truth, i.e., an inquiry into the agreements of sale for Parcels 12, 13, and 48.   The circuit court determined that “[i]f a title search had been made of the grantor index from the Baileys, the Waite Agreement of Sale and the Whitney Agreement of Sale would have been found immediately.” ⁸  Thus, the Clog Parties' search of the chain of title for only Parcel 49 was unreasonable in light of the discrepancies that existed between the DROA and the title search, an obvious problem that could have been easily addressed.⁹

Finally, as the circuit court properly determined, “ the vendors under the Clog Agreement of Sale were both the Baileys individually and Bailey Farms.”   Not only did the DROA place the Clog Parties on notice that Parcel 49 was being offered for sale by the Baileys, and not Bailey Farms, but the agreement of sale, which conveyed Lot 49 to the Clog Parties, explicitly listed the Baileys, individually, as vendors of Lot 49.   Moreover, Bailey Farms was never even listed as a vendor in the initial contract, the DROA, only the Baileys were.   Because the Baileys consistently signed both the DROA and the agreement of sale with respect to Parcel 49 as individuals, the Clog Parties had actual notice that the Baileys, as individuals, had an ownership interest in Parcel 49.

Accordingly, we hold that the Clog Parties were not bona fide purchasers without notice because they had actual notice of the easement in their own DROA, had actual notice that the Baileys as individuals were the vendors, and failed to conduct a reasonable inquiry into the chains of title of Parcels 12, 13, and 48.

4. The Baileys Had The Authority to Convey the Easement on Behalf of the Partnership.

The Clog Parties further argue that the easement is invalid because (1) the Baileys had no ownership interest in Parcel 49 at the time they conveyed the easement in favor of Parcels 12 and 48 because Parcel 49 had already been conveyed to Bailey Farms, and (2) inasmuch as Bailey Farms owned Parcel 49, the Baileys could not convey an interest in Parcel 49 in their own names according to HRS §§ 425-108 (1993) ¹⁰ and 425-110 (1993) ¹¹ .  We disagree.

While the Baileys did not have any personal ownership interest in Parcel 49 when they conveyed the easement, as the sole partners of Bailey Farms they had the authority to convey the easement in their own names and bind the partnership.   Although HRS § 425-108 prohibits the conveyance of partnership property other than in the name of the partnership, HRS §§ 425-109(1) (1993) ¹² and 425-110 provide that where title to partnership real property is held in the name of the partnership, one partner, in his or her own name, may convey the partnership's equitable interest in the partnership in the real property if the act is within the real or apparent authority of the partner.  Block v. Lea, 5 Haw.App. 266, 274, 688 P.2d 724, 732 (1984) (interpreting HRS § 425-110(4) and HRS § 425-109(1)).   Inasmuch as one of two partners can convey the partnership's equitable interest in the real property, it stands to reason that both partners can do the same.   Such is the case at bar.

As the sole partners of Bailey Farms, John and Gordean Bailey, together, held the partnership's entire interest in Parcel 49.   The record indicates that both John and Gordean signed the agreements of sale conveying the easement to Parcels 12 and 48, as well as the Clog Parties' DROA describing the easement across Parcel 49.   Thus, the partnership's entire interest in the easement was properly conveyed to Parcels 12 and 48 by the Baileys acting as individuals.   Because both partners participated in the transaction, it is clear that they had the authority to convey “Bailey Farms' ” property interests.

The facts of this case are unlike cases where only one partner acts to bind the partnership without the consent of the remaining partners.   In such cases, the acting partner's authority may be challenged by the non-consenting partners who do not wish to be bound by the transaction.

[W]here the conveyance is in an individual partner's name the grantee obtains the interest of the partnership entity in the property.   The grantee must obtain the legal interests of the other partners by separate conveyance or by suit in equity, ․ in which case the question of the conveying partners' authority will be adjudicated.

Block, 5 Haw.App. at 275 n. 8, 688 P.2d at 732 n. 8 (emphases added).   See Luddington v. Bodenvest Ltd., 855 P.2d 204 (Utah 1993) (inquiry into whether limited partnership agreement conveyed actual authority to general partner to encumber limited partnership property);  Clint Hurt & Associates, Inc. v. Rare Earth Energy, Inc., 198 W.Va. 320, 480 S.E.2d 529 (1996) (inquiry into whether plain language of partnership agreement gave additional general partner actual authority to bind the partnership);  Hofer v. St. Clair, 298 S.C. 503, 381 S.E.2d 736 (1989) (inquiry into whether one partner had actual authority to bind the partnership based on past transactions made on behalf of both partners).

Here, the Baileys' interests constituted the partnership's entire interest, and each of the Baileys conveyed the partnership's interest in the same transaction.   It is therefore clear that they each consented to the transaction and that they had the authority to bind the partnership in the conveying transaction.   Therefore, the Baileys' conveyance of the easement across Parcel 49 in their own names was tantamount to the conveyance of the easement by the Bailey Farms partnership.

5. The Easement Did Not Merge into the Compliance Deed.

The Clog Parties next argue that the circuit court erred in finding that an easement existed in favor of Parcel 12, owned by Whitney, Gold, and Snapper Cay, because under the doctrine of merger, the terms of their agreement of sale merged into the compliance deed, extinguishing the easement and making it unenforceable.

In 1983, Whitney, Gold, and Snapper Cay made their final payment under their agreement of sale with the Baileys, and a Compliance Deed was recorded for Parcel 12.   The Compliance Deed gave legal title to Parcel 12 to Whitney, Gold, and Snapper Cay, but it made no mention of the easement.   Whitney, Gold, Snapper Cay, the Waites, and Barnett counterargue that the doctrine of merger does not apply in this case because the compliance deed was based on a factual mistake.   We agree.

We have held that, “under the doctrine of merger[,] upon delivery and acceptance of the deed, the provisions of the underlying contract for conveyance are merged into the deed and thereby become extinguished and unenforceable.”  S. Utsunomiya Enterprises, Inc. v. Moomuku Country Club, 75 Haw. 480, 514-15, 866 P.2d 951, 968, reconsideration denied, 76 Hawai‘i 247, 75 Haw. 580, 871 P.2d 795 (1994) (citing Dobrusky v. Isbell, 740 P.2d 1325, 1326 (Utah 1987)).   However, we have not, until now, recognized that there are “certain exceptions to this doctrine[,] including fraud, mistake, and the existence of collateral rights in the contract of sale.”  Secor v. Knight, 716 P.2d 790, 793 (Utah 1986).

The exception for a mistake is particularly relevant to this case.   Where it is undisputed that the parties mistakenly omitted an easement from the deed, the doctrine of merger is inapplicable, and the easement is not extinguished.  West v. Bowen, 127 Idaho 128, 898 P.2d 59 (1995) (under facts nearly identical to this case, the Idaho supreme court held that the doctrine of merger was inapplicable where it was uncontested that the parties mistakenly omitted an airport easement from the deed).   Here, the Baileys and the Snapper Cay parties admit that the easement was mistakenly omitted from Snapper Cay's Compliance Deed. Accordingly, we hold that the easement over Parcel 49 in favor of Parcel 12 was not extinguished by merging into the compliance deed.   Thus, the Baileys were not precluded from filing a correction deed granting an easement over Parcel 49 in favor of Parcels 12 and 48.

In 1990, the Baileys recorded a correction deed to correct the omission in the compliance deed by granting an easement over Parcel 49.   The correction deed re-established that there was an easement over Parcel 49 in favor of Parcels 12 and 48 and included an Exhibit “B” describing the easement.   In return for the correction deed, Whitney and Gold agreed, in writing, not to sue the Baileys for damages resulting from the Parcel 12 agreement of sale or the compliance deed.   The Clog Parties argue that the Correction Deed was a “complete nullity” because the Baileys could not convey any interest in Parcel 49 in their own names.   However, because we have held, supra, that the Baileys had the authority to convey the partnership's entire interest in their own names, this argument is without merit and need not be further addressed.

6. The Easement Is Not Void under the Maui County Code Subdivision Ordinance.

In the alternative, the Clog Parties argue that, according to Maui County Code (MCC) § 18.04.470 ¹³ a easement,¹⁴ is considered, in and of itself, subdivided land and requires approval by the director as mandated by MCC § 18.04.020B.¹⁵ At the time the easement was created, these provisions were codified as Ord. 789, §§ 11-1.1 and 11-1.4 (1974), respectively, and shall be referred to as such hereinafter.   According to the Clog Parties, the Baileys' failure to acquire the director's approval voids the easement.   The circuit court ruled that the easement did not violate the MCC subdivision ordinance because the purpose of the ordinance was to ensure access to public facilities and utilities and, thus, did not apply to a pedestrian easement that provided access to the ocean.   We agree.

At the hearing on the motion for summary judgment on this issue, counsel for the Clog Parties and the circuit court engaged in the following colloquy:

[THE COURT:] If there's anything-I just don't think the failure to follow that subdivision ordinance necessarily renders everything void.   I think there's a problem with the clarity of the ordinance.   I'm not sure it's plain here that there is an access easement in the meaning of the ordinance.   I think the ordinance must be construed in accordance with its purpose, which is to insure that access to public facilities and utilities is taken into account.   Here we're talking about a pedestrian easement which gives access only to the ocean and I don't think it can be selectively applied here as well.   So I'm inclined to deny that.

[CLOG:] Your Honor, I won't belabor the point.   I'll point out that the Maui subdivision ordinance under the definition does declare an easement as subdivided land and the ordinance itself draws-mentions the word roadway or access.

THE COURT:  Easements for access purposes.   Access to what?   What is the intent of that?

[CLOG:] It talks about easements for roadway or access.   I think the word roadway clearly talks about vehicular access.   That's what roadway access, I think, the plain meaning is and I think access is the catch-all that would include all other types of accesses.

THE COURT:  Even if that's the case, though, wouldn't that mean that everybody is a co-tenant at this point?   You know, I mean -

[CLOG:] No, because again as we point out ultimately under Section 1-6 we're talking about prohibitory acts [sic] will be deemed void under 1-6 of the Hawaii Revised Statutes and the whole idea is to prevent the sale of lots of that type.   So, no, I don't think there's a tenancy in common there.

THE COURT:  In any event I'm going to deny it, Mr. McKeon.

(Emphasis added.)

When interpreting a municipal ordinance, we apply the same rules of construction that we apply to statutes.   The interpretation of a statute is a question of law reviewable de novo.   The purpose of the ordinance may be obtained primarily from the language of the ordinance itself;  however, in order to construe the ordinance in a manner consistent with its purpose, the language must be read in the context of the entire ordinance.

Weinberg v. City and County of Honolulu, 82 Hawai‘i 317, 322, 922 P.2d 371, 377 (1996) (citations and quotation marks omitted) (emphasis added).

Reading the MCC subdivision provisions in pari materia, it appears that the ordinance requires approval, by the director, of easements created for the purpose of subdividing land, as indicated by the language “all streets or ways within the county of Maui created for the purpose of subdividing land, shall be approved by the director in accordance with these regulations.”   MCC § 11-1.4 (emphasis added).   That the ordinance only pertains to easements created as a part of a subdivision is evidenced by other provisions that require easements to be designated in the subdivision plat that is submitted for final approval.   See MCC Ord. 789 § 11-1.6(d)(3)(b).¹⁶  Here, no such plat was submitted because the Baileys did not create a subdivision when they created the easement.   In fact, the easement was created after the Baileys had subdivided the property and conveyed the subdivided parcels to themselves and their partnership.   Furthermore, the easement in favor of Lots 12 and 48 runs as far to the east of Lot 48 as possible and runs mauka-makai from a roadway to the cliff overlooking the ocean.   The easement neither leads to subdivided lands nor bisects one parcel into separate lots.   Accordingly, we hold that MCC Ord. 789, §§ 11-1.1 and 11-1.4 (1974) are inapplicable in this case and that the Baileys were not required to seek approval from the planning director of the County of Maui in order for the easement across Lot 49 to be valid.

For the foregoing reasons, we affirm the findings and conclusions of the circuit court granting summary judgment in favor of Whitney, Gold, and Snapper Cay, the Waites, and Barnett, ruling that an easement exists across Parcel 49 in favor of Parcels 12 and 48.

We now turn to the remaining issue on appeal addressing the relocation of the easement.

B. THE CIRCUIT COURT ABUSED ITS DISCRETION IN FINDING THE SHERMAN DESCRIPTION OF THE EASEMENT AMBIGUOUS AND IN EXERCISING ITS EQUITABLE POWERS TO RELOCATE THE EASEMENT.

Although the Clog Parties, Whitney, Gold, Snapper Cay, the Waites, and Barnett all disagree about whether the easement existed, each party agrees that the circuit court abused its discretion in finding that the metes and bounds description of the easement prepared by Mr. Sherman in the agreements of sale was ambiguous.   Thus, they contend that the circuit court should not have exercised its equitable powers to reposition the easement.   They argue that, at most, the description was only ambiguous insofar as the last marker of the Sherman easement stopped short of the seaward boundary by roughly 35 feet.   Thus, the circuit court should only have exercised its equitable powers to extend the easement to the cliff, not to reposition the entire easement.   We agree.

After a non-jury trial that included site visits to the property, the trial judge found that Sherman's description of the easement “was not in accord with the parties' intent in that it failed to serve its purpose by not reaching the seaward boundary, was not as close to the Hianaulua Gulch as feasible and traversed a steep, rocky outcropping that could be easily avoided.”   Based on these grounds, the trial judge found the description ambiguous and, relying on Adair v. Kona Corp., 51 Haw. 104, 452 P.2d 449 (1969), and Consolidated Amusement Company, Ltd. v. Waikiki Business Plaza, Inc., 6 Haw.App. 312, 719 P.2d 1119 (1986), exercised its equitable powers to relocate the easement to what was deemed a safer and more accessible location that better effectuated the intent of the parties.   The circuit court's reliance on these cases was misplaced inasmuch as these cases compel a contrary result.

A court can exercise its equitable powers to relocate an easement only where the easement is not definitely located in the grant or reservation, and the dominant and servient owners fail to agree.  Adair v. Kona Corp., 51 Haw. at 114, 452 P.2d at 455.   In Adair, the parties had created a floating easement:  an easement reserved in the conveyance documents without a metes and bounds description, to be later fixed along a specific course at the time of construction.   The Adair court stated that

[t]he absence of [a] metes and bounds description would not have posed any insurmountable problem in case of disagreement between the mortgagor and the mortgagee, for the law is that where an easement is not definitely located in a grant or a reservation, and the dominant and servient owners fail to agree, a court may locate it in the exercise of its equity of powers.

Id. Unlike the parties in Adair, the Baileys did not create a floating easement across Parcel 49, and a metes and bounds description was not absent.   Rather, the metes and bounds description of the easement was definite as set forth in the agreements of sale for Parcels 12 and 48.   Thus, the circuit court erred in finding that the description was ambiguous.   Paragraph 32 of the agreements of sale specifically refer to the “Grant of Easement” to the purchaser.   The document specifically states that the “[p]urchaser shall have a perpetual nonexclusive ten-foot right and easement for ingress and egress to and from the ocean over, across, along, upon and through those certain premises owned by Seller and more particularly described in Exhibit “B” [.]” Exhibit “B” specifically characterized the easement as being a ten-foot-wide pedestrian access easement described by a center line which follows the metes and bounds description as contained therein.   The starting point of the easement is “on the Northerly boundary of this parcel of land, also on the Northerly side of the Government Roadway[,]” at the coordinates of a given point.   As found by the circuit court in its findings of fact, all of the surveyors involved in this case were able to locate the starting point of the easement and plot the easement according to the coordinates stated therein:

29.  In 1989[,] George Newcomber, a surveyor licensed by the State of Hawaii, located and surveyed the Sherman easement across Parcel 49 by using the Sherman easement survey and Sherman easement map.   Iron pins were placed on the starting points in each of the 20 points described in the Sherman easement survey.

30.  In March of 1993, Mr. Newcomber re-surveyed the Sherman easement and marked its location on Parcel 49.

31.  A second surveyor licensed by the State of Hawaii, James Thompson, testified at trial that by using the Sherman easement survey and the Sherman easement map, he was able to locate the Sherman easement on Parcel 49 as previously located by Mr. Newcomber.

Based on these findings, there cannot be an ambiguity in the location of the easement according to the metes and bounds description contained in the agreements of sale.   As given in the agreements of sale, the easement is unambiguously defined and should have been enforced at its location by the trial judge.   Where the location of the easement is clearly defined in the conveying documents, the terms control the placement of the easement and neither necessity nor reasonableness relative to the use of the easement may be considered.  Consolidated, 6 Haw.App. at 317-18, 719 P.2d at 1123.

The general rule, as stated in Consolidated Amusement, is as follows:

[W]here the width, length and location of an easement for ingress and egress have been expressly set forth in the instrument the easement is specific and definite.   The expressed terms of the grant or reservation are controlling in such case and considerations of what may be necessary or reasonable to a present use of the dominant estate are not controlling.   If, however, the width, length and location of an easement for ingress and egress are not fixed by the terms of the grant or reservation the dominant estate is ordinarily entitled to a way of such width, length, and location as is sufficient to afford necessary or reasonable ingress and egress.

6 Haw.App. at 317-18, 719 P.2d at 1123 (some emphasis in original and some added).   The Consolidated Amusement court determined that the width, length, and location of the easement were clearly set forth in the land court documents, and, consequently, these terms controlled, rather than necessity and reasonableness relative to Consolidated's use of the easement.

Appellants and respondents argue that the only ambiguity in the Sherman Survey is the distance between the last point on the survey, Point No. 20, and the shoreline, where the trail to the ocean begins, and, thus, it is only to this portion of the easement that the circuit court should have exercised its equitable powers to cure the ambiguity.   We agree.

Finding of Fact No. 20 states:  “Two surveyors testified at trial and the Court finds that the Sherman easement failed to provide access to the ocean in that the last point, point number 20, stops approximately 35 feet short of the seaward boundary.”   The circuit court properly interpreted and effectuated the intent of the Baileys when it extended the easement from Point No. 20 to the shoreline.   Given that the Baileys' intent for the easement was to allow access to the ocean from the upper parcels, this extension was clearly appropriate.   Accordingly, we affirm this aspect of the circuit court's decision.

We hold, however, that the circuit court abused its discretion in finding the entire easement description ambiguous and relocating the easement to a location not in accordance with the metes and bounds description in the agreements of sale.   The circuit court should have affirmed the location of the easement as described by the Sherman Survey in the agreements of sale and cured the only ambiguity in the easement by extending the easement from Point No. 20 to the shoreline.   Accordingly, we (1) reverse the decision of the circuit court insofar as it finds the entire description of the easement ambiguous and relocates the easement to a location contrary to the metes and bounds description in the agreements of sale, and (2) affirm the circuit court's decision to extend the easement from Point No. 20 to the seaward boundary, where the cliff trail begins.

Because we reverse the circuit court's order insofar as it relocates the entire easement, Barnett's and Waites' argument that the Clog Parties should be charged with the duty of maintaining and constructing the relocated sections of the easement need not be addressed.   We note that paragraph 32(a) of their agreements of sale require that as purchasers, they bear the burden of maintaining the easement:

(a) That Purchaser will use due care and diligence to keep said easement in a good and safe condition and repair, to keep said easement free from litter and debris, and will exercise their rights hereunder in such manner [sic] as to occasion as little interference as reasonably necessary with the use of said lands by the owners and occupants thereof[.]

IV. CONCLUSION

For the foregoing reasons, we (1) affirm the circuit court's grant of summary judgment in favor of Whitney, Gold, Snapper Cay, Barnett, and the Waites, deciding that an easement exists across Parcel 49 in favor of Parcels 12 and 48 and (2) vacate the circuit court's ruling as to the location of the easement.   On remand, the circuit court shall enforce the Sherman Survey description of the easement, exercise its equitable powers only to extend the easement from Point No. 20 to the cliff trail.

I respectfully dissent from the majority's holding.   In my view, the actions of the Baileys were insufficient to create a legally binding easement over Parcel 49.   Even if the purported attempt to create an easement was legally effective, a reasonable inquiry subsequent to receiving “actual notice” of the easement in the DROA would not have informed the Clog Parties of the easement's existence.   Therefore, I would reverse the judgment of the circuit court and hold that:  (1) the Plaintiffs could not seek relief against the Clog Parties in the form of a property interest over Parcel 49, but could only seek equitable relief against the Baileys;  and (2) the Clog Parties were bona fide purchasers of Parcel 49 without notice of any encumbrances and took title to Parcel 49 free and clear of any encumbrances.

In my view, the dispositive facts which invalidate the majority's disposition are:  (1) that the Baileys individually purported to create an easement over property that was owned by Bailey Farms, a legally independent entity;  and (2) that the deed to Parcel 49, the ostensibly servient property, contained no mention of the easement.

HRS § 425-108(3) (1993) provides in pertinent part:

Any estate in real property may be acquired in the partnership name.   Title so acquired can be conveyed only in the partnership name.

(Emphasis added).   Additionally, HRS § 425-110(2) (1993) provides:

Where title to real property is in the name of the partnership, a conveyance executed by a partner, in the partner's own name, passes the equitable interest of the partnership, provided the act is one within the authority of the partner under the provisions of [HRS § 425-109(1) (1993) ].

(Emphasis added.)

In this case, Bailey Farms acquired Parcel 49 in the partnership name from the Baileys prior to the sale of Parcels 12 and 48 from the Baileys to the Plaintiffs.   Nonetheless, in the sale of Parcels 12 and 48, the Baileys attempted to individually create and convey an easement in Parcel 49.   The Baileys could not create a legally enforceable property interest in property they did not own, and the attempt to create an easement over Parcel 49 in favor of Parcels 12 and 48 should result only in the creation of an equitable interest.   Therefore, the Plaintiffs had an equitable remedy against the Baileys, i.e., they could sue the Baileys for the diminution in value of Parcels 12 and 48 because they did not have a legally enforceable easement over Parcel 49.   However, the plain language of HRS 425-110(2) precludes the Plaintiffs from suing to enforce a legal right to utilize the easement over Parcel 49.

I disagree with the majority's analysis, section III.A.4, that holds that, if one partner can convey an equitable interest in the property, then both partners may convey the full legal interest.   In my view, this is directly contrary to the plain language of HRS 425-110(2).   While all members of a partnership may convey the full equitable interest in a property, in the instant case-involving an easement rather than fee simple ownership-the individual partners may not convey a legally enforceable property interest in property that they do not individually own.  HRS § 425-108(3) specifically mandates that a property interest owned by a partnership “can be conveyed only in the partnership name.”  (Emphasis added.)   By holding that a property interest may be conveyed in the partners' individual names, the majority's opinion completely invalidates this statutory section, in derogation of well-established principles of statutory construction.

Further, a conveyance by the partners in their individual names falls outside of the chain of title of property held in the partnership name.   An equitable grantee should not have rights against subsequent grantees in the chain of title because an equitable interest would not be discovered in an inquiry into the partnership's title.   Finally, the majority's holding disregards the existence of a partnership as a separate entity, legally distinct from its partners.   Therefore, I would hold that the easement is legally unenforceable and that the Plaintiffs are limited to an equitable remedy.

Even if the easement were legally enforceable, under the facts of this case, the reasonable inquiry mandated by the notice of the easement in the DROA would have failed to notify the Clog Parties of the easement's existence.  HRS § 502-83 (1993) provides that:

All deeds, leases for a term of more than one year, mortgages of any interest in real estate, or other conveyances of real estate within the State, shall be recorded in the bureau of conveyances.   Every such conveyance not so recorded is void against any subsequent purchaser, lessee, or mortgagee, in good faith and for a valuable consideration, not having actual notice of the conveyance of the same real estate, or any portion thereof, or interest therein, whose conveyance is first duly recorded.

It is incontrovertible, therefore, that if the Clog Parties did not have “actual notice” of the purported easement, it would be void under this section.   The issue, therefore, is whether placing a notation in the DROA of the existence of the purported easement was sufficient to provide “actual notice” under the statute.

The Clog Parties purchased the subject property from Bailey Farms.   A search of the record or the grantor-grantee index of Parcel 49 would not have uncovered the existence of the easement because the Baileys individually created the purported easement and no record was made of the easement's existence in any document indexed under the partnership name.

The statement in the DROA that Parcel 49 was encumbered by a ten foot pedestrian easement at the northerly end of the property in favor of Parcels 12 and 48 was enough to place the Clog Parties “on notice” of a potential interest burdening Parcel 49.   However, a diligent search and investigation of the record of title by the Clog Parties would not have found any evidence of an easement burdening Parcel 49.   Although there was an attempt to create an easement in the agreements of sale for Parcel 12 and Parcel 48, the easement was not recorded in the correct place at the time of the inquiry, and did not appear in Parcel 49's chain of title.   I would hold, therefore, that the Clog Parties did not have “actual notice” of the easement.

The majority holds that the Clog Parties were not bona fide purchasers because they had actual notice of the easement because the Baileys signed the DROA, and the agreement of sale named Bailey Farms and the Baileys individually as vendors.   Therefore, the majority states that the Clog Parties were on notice that the Baileys individually had an ownership interest in Parcel 49.   This, according to the majority, should have indicated that the Baileys individually were the sellers of both parcels and should have led the Clog Parties to search the grantor-grantee index under the names of the Baileys individually, which would have uncovered the agreements of sale for Parcels 12 and 48.

The DROA and the agreement of sale covered both Parcel 49 and Parcel 51.   While the partnership held title to Parcel 49, the Baileys held title to Parcel 51 in their own names.   Bailey Farms' absence from the DROA put the Clog Parties on notice to confirm the ownership of Parcels 49 and 51.   Title searches confirmed the partnership's ownership of Parcel 49 and the Baileys' ownership of Parcel 51;  thus Bailey Farms and the Baileys were the vendors under the agreement of sale.   Nothing in Parcel 49's chain of title indicated that it was encumbered by an easement in favor of Parcels 12 and 48.   Neither was there any reservation by the Baileys in their conveyance of Parcel 49 to the partnership.   Therefore, reasonable inquiry did not require the Clog Parties to investigate the Baileys' other conveyances after they had conveyed all of their interest in Parcel 49 to the partnership.

The title search performed prior to the sale of Parcel 49 did not discover the existence of the purported easement.   Under the majority's holding, the statement in the DROA that an easement existed would require the title search to review all properties previously conveyed, not only by the partnership, but also under the names of all the individual partners.   In my view, this is an unreasonable burden to place on a potential buyer and title search companies.

The Baileys should not benefit from their failure to properly record the easement on the deed to Parcel 49.   The majority's holding gives legal effect to an ambiguous statement in the DROA. I note that, under the doctrine of merger, upon the signing of the agreement of sale, the DROA ceased to have legal existence.   This court has applied the doctrine of merger between an agreement of sale and a deed.  S. Utsunomiya Enterprises, Inc. v. Moomuku Country Club, 75 Haw. 480, 514-15, 866 P.2d 951, 968, reconsideration denied, 76 Hawai‘i 247, 75 Haw. 580, 871 P.2d 795 (1994) (citations omitted).   The majority argues that the doctrine is limited only to agreements of sale and deeds.   However, other jurisdictions have applied merger apart from agreements of sale and deeds.   See Peters v. Fenner, 294 Minn. 488, 199 N.W.2d 795 (1972) (earnest money contract merged into contract for deed);  Venisek v. Draski, 35 Wis.2d 38, 150 N.W.2d 347 (1967) (preliminary purchase agreement merged into land contract).   Although the natures of a DROA, an agreement of sale, and a deed are different, the basic principle of merger, that a subsequent instrument controls over a preceding one, still applies.

The agreement of sale between Bailey Farms and the Clog Parties specifically warranted that Bailey Farms would convey marketable title to Parcel 49 “free from any and all liens and encumbrances,” other than those specifically mentioned.   The agreement of sale did not mention any easement over Parcel 49 in favor of Parcels 12 and 48.   I disagree with the majority's holding that the ambiguous language in the DROA, referring to a purported easement which was not recorded and, pursuant to statute, had no legal existence, was sufficient to trump the plain and unambiguous language of the agreement of sale.

For all of the foregoing reasons, I respectfully dissent from the majority opinion.

FOOTNOTES

2.   Lot 16 was actually divided into five lots, but only Parcels 12, 48, and 49 are relevant to this appeal.

3.   EuroAtlantic Ltd. is owned and controlled by EuroAtlantic S.A. EuroAtlantic S.A. owns EuroAtlantic International, which provides business services to Harrison, as well as Glenbrook.   Glenbrook owns Clog. One of EuroAtlantic Ltd.'s officers, Denis O'Brien, was Harrison's business manager.Although the purchase of Parcel 49 was not by Harrison personally, it appears that the EuroAtlantic entities and the Clog Parties are controlled by Harrison and used by him to shelter his financial interests.

4.   The “northerly end” language of the DROA and Exhibit “B” referred to the fact that Parcel 49 is located on the northerly portion of the original Lot 16, and that the lots on the southerly portion of Lot 16 (12 and 48) had access to a pedestrian easement over the northerly portion of Lot 16 (Parcel 49).

5.   Because the circuit court found that the Easement existed, it resolved several other motions for summary judgment in the following orders:  (1) an order denying the Clog Parties' motion for partial summary judgment against all claimants regarding the Maui Subdivision Ordinance, filed December 28, 1993 (Subdivision Ordinance Order), which denied the Clog Parties' claim that the creation of the Easement was void under the Maui Subdivision Ordinance;  (2) an order denying the Clog Parties' motion for partial summary judgment regarding the issue of express grant of easement, filed December 28, 1993 (Grant of Easement Order), in which the Clog Parties sought to prevent the Baileys, Bailey Farms, Whitney, Gold, or the Third-Party Defendants from asserting that the Baileys or Bailey Farms conveyed an easement over Parcel 49 by express grant;  and (3) an order denying the cross-motion for partial summary judgment filed by defendant Lawyer's Title Insurance Corporation, filed December 28, 1993 (Merger Order), which ruled that the doctrine of merger did not extinguish the easement.

6.   Agorastos was a dual agent of the Baileys and the Clog Parties.   On July 13, 1978, the Baileys, individually, entered into a listing agreement (which explicitly contained notice of the easement) with Earl Thacker Co. to sell Lot 49.   Agorastos was their listing agent.   She also served as real estate agent for the buyers, the Clog Parties.   As a dual agent, Agorastos was responsible for facilitating the offer and acceptance and closing the resulting contract in escrow.

7.   EuroAtlantic's rights under the DROA were transferred to Glenbrook, Clog, and Calley, and eventually to the current owners, Harrison (two-thirds interest) and Glenbrook (one third interest) by agreements of sale.

8.   While this finding of fact is challenged by the Clog parties, the finding is supported by uncontroverted evidence that a search of the grantor index under John and/or Gordean Bailey would have revealed the Waite agreement of sale and the Whitney agreement of sale.

9.   We agree with the dissent that in S. Utsunomiya Enterprises, Inc. v. Moomuku Country Club, 75 Haw. 480, 514-15, 866 P.2d 951, 968 (1994) this court applied the doctrine of merger between an agreement of sale and a deed.   However, S. Utsunomiya has not been extended to the merger of a DROA into an agreement of sale, an entirely different proposition.   That the terms of an executory contract, such as an agreement of sale, would merge into a deed is neither news nor precedent for the dissent's unsupported reasoning.There is no relevant case law cited by the dissent to establish its basic proposition that the DROA, a legally binding contract, merges into a conveyancing document, such as an agreement of sale or a deed.   The dissent's reliance on Peters v. Fenner, 294 Minn. 488, 199 N.W.2d 795 (1972) is misplaced.  Peters deals only with prepayment terms.   Because it is comprehensible that prepayment issues would not usually be addressed in an earnest money contract, this is authority is unpersuasive.Moreover, the dissent relies on Venisek v. Draski, 35 Wis.2d 38, 150 N.W.2d 347 (1967) for the proposition that a “preliminary purchase agreement merged into land contract.”   At issue in Venisek was a zoning ordinance exception contained in the preliminary purchase agreement.   The Wisconsin Supreme Court noted that the zoning ordinance was not an encumbrance or a restriction.   Because the subsequent land sale contract only omitted the zoning ordinance exception, rather than an encumbrance or a restriction, the omission did not constitute a substantive merger.The dissent's conclusion that the DROA “merges” into the agreement of sale finds no support in the case law.   Nevertheless, inasmuch as the issue is whether the purchasers had sufficient knowledge to be on inquiry notice concerning the existence of an easement over Lot 49, whether the DROA “merged” into the agreement of sale or was “superseded” by it is irrelevant.   Neither result can change the fact that the buyers were clearly aware that Lot 49 was potentially burdened by a servient easement favoring Lots 12, 13, and 48.

10.   HRS § 425-108 provides in relevant part:(3) Any estate in real property may be acquired in the partnership name.   Title so acquired can be conveyed only in the partnership name.

11.   HRS § 425-110 provides in relevant part:Conveyance of real property of the partnership. ․(2) Where title to real property is in the name of the partnership, a conveyance executed by a partner, in the partner's own name, passes the equitable interest of the partnership, provided the act is one within the authority of the partner under the provisions of paragraph (1) of section 425-109.(Emphasis added).

12.   HRS § 425-109(1) provides:Partner agent of partnership as to partnership business.  (1) Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which the partner is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom the partner is dealing has knowledge of the fact that the partner has no such authority.(Emphasis added.)

13.   MCC § 18.04.470 provides in relevant part:Subdivision. “Subdivision” means improved or unimproved land or lands divided into two or more lots, parcels, sites, or other divisions of land for the purpose, whether immediate or future, of sale, lease, rental, transfer of title to or interest in, any or all such parcels, and includes resubdivision, and when appropriate to the context relates to the process of subdividing of the land or territory subdivided.   Easements for roadway or access purposes shall be construed as subdivided land.(Emphasis added.)

14.   An easement is defined as “a grant of the right to use a strip of land for specific purposes.”   MCC § 18.04.170.

15.   The provision of MCC § 18.04.020 upon which the Clog Parties rely provides in relevant part:18.04.020 Authority and scope.A.  Authorized by 8-5.3 of the charter of the county of Maui, all subdivisions and consolidations, and all streets or ways within the county created for the purpose of subdividing land, shall be approved by the director in accordance with this title.B. Any person desiring to subdivide or consolidate land shall submit plans and documents for approval as provided by this title.   No subdivision plat may be filed with the bureau of conveyances or land court or state department of taxation until submitted to and approved by the director.   Land shall not be offered for sale, lease or rent in any subdivision, nor shall options or agreements for the sale, lease or rental of land in any subdivision be made until approval for recordation of the final plat is granted by the director as provided in this title, unless such offer, option or agreement expressly provides in writing that such sale, lease or rental of land in the subdivision shall not occur nor become effective unless and until approval for recordation of the final plat is granted by the director as provided in this title.(Emphases added).In 1994, subsections (C) through (F) were added to MCC § 18.04.020. Although not applicable to this case because of its recent enactment, subsection (C) now provides that easements created for ingress and egress without the creation of new lots need not be approved by the director.   Subsections (C) through (F) provide:C. The requirements of this title shall not apply to a consolidation/resubdivision of two or more developable lots resulting in the same or fewer number of developable lots that existed before the consolidations resubdivision action or to the establishment of easements for ingress and egress where no new developable lots are created together with the establishment of the easement subject to the following conditions.1.  Compliance with title 19 of this code or chapter 205, Hawaii revised statutes or both.2.  Compliance with chapter 18.08 of this title except for section 18.08.090.3.  Compliance with chapter 18.12 of this title except for Section 18.12.070.4.  Compliance with chapter 18.24 of this title.D. Parcels that have undergone consolidation/resubdivision under this subsection shall not qualify for this exception with respect to any subsequent consolidation/resubdivision of any of the parcels.E.  If the director of public works and waste management finds that the subdivision will have a significant or substantial impact upon public facilities or infrastructure, the director of public works and waste management may impose those requirements in title 18 that are appropriate.F. The director of public works and waste management shall adopt rules to implement the provisions of section 18.04.020E.(Emphases added.)

16.   MCC Ord. § 11-1.6(d)(3)(b) (1974) provides in relevant part:(3) Proposed plan of land subdivision.The following information shall be included on the preliminary plat:․(b) Existing and proposed easements showing width and purpose.

Opinion of the Court by KLEIN, J.