Cowan v. Exclusive Resorts PBL1, LLC. ICA Order Approving the January 19, 2023 Stipulation to Dismiss With Prejudice Plaintiffs-Appellants/Cross-Appellees Umang P. Gupta and Ruth M. Gupta, as Trustees of the Umang and Ruth Gupta Trust Under Trust Agreement Dated January 18, 2000, filed 01/24/2023 [ada]. ICA mem. op., filed 01/27/2023 [ada], 152 Haw. 162. Application for Writ of Certiorari, filed 05/20/2024. S.Ct. Order Accepting Application for Writ of Certiorari, filed 07/16/2024 [ada].

Hawaii Supreme Court·Decided August 14, 2025·No. SCWC-17-0000714·Published

Opinion

Electronically Filed

Supreme Court

SCWC-XX-XXXXXXX

14-AUG-2025

09:17 AM

Dkt. 31 OP

IN THE SUPREME COURT OF THE STATE OF HAWAII ---o0o---

DAVID COWAN and NATHALIE COWAN; and PAUOA BEACH 8 LLC, a Hawaiʻi Limited Liability Company, Petitioners/Plaintiffs-Appellants/Cross-Appellees,

and

UMANG P. GUPTA and RUTH M. GUPTA, as Trustees of the Umang and Ruth Gupta Trust under Trust Agreement dated January 18, 2000;

Respondents/Plaintiffs-Appellants/Cross-Appellees,

and

ROARING LION, LLC, a Montana Limited Liability Company;

ROGER A. GREENWALD and JENNIFER A. HURWITZ, Respondents/Plaintiffs-Appellees/Cross-Appellees,

vs.

EXCLUSIVE RESORTS PBL1, LLC, a Delaware Limited Liability Company;

Respondent/Defendant-Appellee/Cross-Appellant,

and

PAUOA BAY PROPERTIES LLC, a Delaware Limited Liability Company;

WHITE SAND BEACH LIMITED PARTNERSHIP, a Delaware Limited Partnership; PAUOA BEACH REALTY LLC, a Hawaiʻi Limited Liability Company; EXCLUSIVE RESORTS PBL3, LLC, a Delaware Limited Liability Company;

Respondents/Defendants-Appellees/Cross-Appellees.

SCWC-XX-XXXXXXX

CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-XX-XXXXXXX; CASE NO. 3CC041000332)

AUGUST 14, 2025

RECKTENWALD, C.J., McKENNA, EDDINS, AND DEVENS, JJ., AND CIRCUIT JUDGE JOHNSON, IN PLACE OF GINOZA, J., RECUSED

OPINION OF THE COURT BY DEVENS, J.

I. INTRODUCTION

This case involves the use of a residential lot in the Pauoa Beach Subdivision (subdivision) located in the Mauna Lani Resort master development. Petitioners David Cowan, Nathalie Cowan, and Pauoa Beach 8 LLC (Plaintiffs) are residential owners of units located in the makai subdivision (ocean-facing). Respondent Exclusive Resorts PBL1 (PBL1 or Defendant) owns a residential lot (Lot B) in the mauka subdivision (upland- facing), where it developed four duplexes consisting of eight condominium units.

PBL1’s parent company, non-party Exclusive Resorts, LLC (ER), operates a membership program (described as a luxury destination club) which allows ER members to stay at certain properties, including Lot B, in exchange for the payment of annual dues. Plaintiffs’ primary contention is that PBL1 is engaging in a “commercial use” of its Pauoa Beach residential property in violation of the Mauna Lani Resort Declaration of

Covenants and Restrictions (Resort Declaration) and the Pauoa Beach Declaration of Covenants, Conditions, Restrictions, and Easements (collectively, the Project Documents), which allows owners to operate short-term rentals, but restricts the “commercial use” of the properties.

This is the second appeal in this matter. In the first appeal, the Intermediate Court of Appeals (ICA) vacated the Circuit Court of the Third Circuit’s (circuit court) granting of summary judgment regarding PBL1’s use of Lot B, and remanded the case to the circuit court for a factual determination on PBL1’s actual use of Lot B. 1 In the second appeal, the ICA concluded that based on the actual use of Lot B, PBL1’s use was not in violation of the Project Documents. Concluding that PBL1 was the prevailing party, the ICA subsequently awarded PBL1 attorney fees and costs based on Hawaiʻi Revised Statutes (HRS) § 607-14 and Hawaiʻi Rules of Appellate Procedure (HRAP) Rule 39, respectively.

Upon review of the record, we conclude that the ICA did not err in its determination that PBL1’s use of Lot B did not violate the Project Documents and did not abuse its discretion

1 The Honorable Greg K. Nakamura presided in this case.

in awarding costs to PBL1.

However, we reverse the ICA’s award of attorney fees to PBL1. PBL1 sought attorney fees pursuant to HRS § 607-14, which provides for an award of attorney fees “in all actions in the nature of assumpsit and in all actions on a promissory note or other contract in writing that provides for an attorney’s fee[.]” HRS § 607-14 (2016).

In this case, the parties’ Resort Declaration is a contract in writing containing a fee provision that solely provides fees to prevailing plaintiffs who bring actions to enforce the subdivision’s restrictive covenants, and not to parties, such as PBL1, who successfully defend such actions. Under these facts and circumstances, the Resort Declaration is an enforceable contract in writing that contains a fee provision. We therefore reverse the ICA’s award of attorney fees to PBL1.

II. BACKGROUND

A. Proceedings in the First Appeal Plaintiffs filed a complaint in 2004 in which they alleged, among other things, that PBL1’s use of Lot B violated the subdivision’s Project Documents. In 2003, Pauoa Bay Properties, LLC sold Lot B to ER, PBL1’s parent company, and, in 2004, Lot B was transferred to PBL1. The nature of ER’s operations is at the center of this dispute. ER runs a membership program that

operates as a vacation club where members pay annual dues to stay at properties owned by ER, including Lot B in the Pauoa Beach subdivision. Plaintiffs claimed that ER’s use of Lot B was “in breach and violation” of the Project Documents’ restriction on commercial use, and that PBL1 was liable for damages. Plaintiffs requested injunctive relief, compensatory damages, punitive and exemplary damages, and attorney fees and costs.

Pauoa Bay Properties, LLC, 2 joined by PBL1, filed a motion for partial summary judgment, which the circuit court granted ruling that as a matter of law, PBL1’s use of Lot B did not violate any residential use restrictions and there were no genuine issues of material fact.

Plaintiffs appealed. The ICA issued a memorandum opinion vacating in part the circuit court’s granting of partial summary judgment insofar as the circuit court concluded that there were no genuine issues of material fact as to whether PBL1’s use of Lot B violated the restrictive covenants. Roaring Lion, LLC v. Exclusive Resorts PBL 1, LLC, No. CAAP-XX-XXXXXXX, 2013 WL 1759002, at *1 (Haw. App. Apr. 24, 2013) (mem. op.).

Relevant here, the ICA interpreted the terms and

2 Pauoa Bay Properties, LLC is no longer a party to this action.

restrictive covenants in the Project Documents, specifically addressing the Project Document’s restriction on commercial use, and concluded as a matter of law that “any use rising to the level of maintaining a ‘gainful occupation, profession or trade’ constitutes a commercial use and cannot be deemed ‘residential’ within the meaning of the Project Documents.” Id. at *4-5. However, the ICA determined that there was a genuine issue of material fact as to whether the impact of PBL1’s actual use of Lot B relating to rental activities rose to a level of “gainful occupation, profession or trade.” Id. at *5-6. Concluding that summary judgment was not appropriate, the ICA remanded the case to the circuit court to resolve the factual issue of whether PBL1’s actual use of Lot B violated the Project Documents. Id. at *5-6, *11.

Neither Plaintiffs nor PBL1 filed an application for writ of certiorari. B. Proceedings on Remand and Second Appeal to the ICA On remand, the circuit court reinterpreted the terms of the Project Documents and, based on its reinterpretation, ruled that PBL1 was a “commercial owner” of “commercial apartments” and was therefore in violation of the Project Documents. However, the circuit court further considered testimony and evidence presented as to PBL1’s actual use of Lot B, and based on PBL1’s

day-to-day operations, the circuit court found that PBL1’s actual use did not rise to a level of commercial use or violate the Project Documents. The court subsequently denied Plaintiffs’ request for an injunction to prohibit PBL1 from continuing its operations.

Both parties appealed. The ICA reversed in part and affirmed in the part the circuit court’s Judgment on Remand (remand judgment). Cowan v. Pauoa Bay Properties LLC, No. CAAP- XX-XXXXXXX, 2023 WL 569373, at *1 (Haw. App. Jan. 27, 2023) (mem. op.).

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Cowan v. Exclusive Resorts PBL1, LLC. ICA Order Approving the January 19, 2023 Stipulation to Dismiss With Prejudice Plaintiffs-Appellants/Cross-Appellees Umang P. Gupta and Ruth M. Gupta, as Trustees of the Umang and Ruth Gupta Trust Under Trust Agreement Dated January 18, 2000, filed 01/24/2023 [ada]. ICA mem. op., filed 01/27/2023 [ada], 152 Haw. 162. Application for Writ of Certiorari, filed 05/20/2024. S.Ct. Order Accepting Application for Writ of Certiorari, filed 07/16/2024 [ada]., (haw 2025).

Cowan v. Exclusive Resorts PBL1, LLC. ICA Order Approving the January 19, 2023 Stipulation to Dismiss With Prejudice Plaintiffs-Appellants/Cross-Appellees Umang P. Gupta and Ruth M. Gupta, as Trustees of the Umang and Ruth Gupta Trust Under Trust Agreement Dated January 18, 2000, filed 01/24/2023 [ada]. ICA mem. op., filed 01/27/2023 [ada], 152 Haw. 162. Application for Writ of Certiorari, filed 05/20/2024. S.Ct. Order Accepting Application for Writ of Certiorari, filed 07/16/2024 [ada]. (Cowan v. Exclusive Resorts PBL1, LLC. ICA Order Approving the January 19, 2023 Stipulation to Dismiss With Prejudice Plaintiffs-Appellants/Cross-Appellees Umang P. Gupta and Ruth M. Gupta, as Trustees of the Umang and Ruth Gupta Trust Under Trust Agreement Dated January 18, 2000, filed 01/24/2023 [ada]. ICA mem. op., filed 01/27/2023 [ada], 152 Haw. 162. Application for Writ of Certiorari, filed 05/20/2024. S.Ct. Order Accepting Application for Writ of Certiorari, filed 07/16/2024 [ada].) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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