Hawaii Conference Foundation v. Kamai-Kaaihue

• Court: Hawaii Intermediate Court of Appeals
• Decided: November 12, 2024
• Docket: CAAP-20-0000768
• Status: Published

Opinion

NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 12-NOV-2024 08:12 AM Dkt. 106 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAIʻI

HAWAII CONFERENCE FOUNDATION, Plaintiff-Appellee, v. LINDA KAMAI-KAAIHUE; ANTHONY TAKEMOTO, Defendants-Appellants, and DOE DEFENDANTS 1-10, Defendants-Appellees. (CIVIL NO. 1CC191000587)

In the Matter of the Dissolution of HAUULA CONGREGATIONAL CHURCH, a dissolved Hawaiʻi nonprofit corporation, also known as HAUʻULA CONGREGATIONAL CHURCH, UNITED CHURCH OF CHRIST (S.P. NO. 1CSP-XX-XXXXXXX)

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT

SUMMARY DISPOSITION ORDER (By: Leonard, Acting Chief Judge, Wadsworth and McCullen, JJ.)

Defendants-Appellants Linda Kamai-Kaaihue and Anthony

Takemoto (or collectively Defendants) appeal from the Circuit

Court of the First Circuit's 1 September 29, 2020 "Findings of

Fact, Conclusions of Law, and Order: (1) Granting in Part and

Denying in Part [Plaintiff-Appellee Hawaii Conference

1 The Honorable James H. Ashford presided. NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Foundation's] Motion for Partial Summary Judgment Filed

April 22, 2020, and (2) Denying Defendant Linda Kamai-Kaaihue

and Anthony Takemoto's Motion for Summary Judgment Filed

July 14, 2020" (Summary Judgment Order) and November 24, 2020

Stipulated Judgment.

For background, Hauula-Kahuku Church was incorporated

on December 18, 1916 by a charter (1916 Charter). Between 1927

and 1942, the Territory of Hawai‘i issued three land patents

granting Hauula-Kahuku Church over 1.7 acres of land in Hau‘ula

(the Property). 2

In March 1976, Hauula-Kahuku Church's name was changed

to Hauula Congregational Church. In September 1977, Hauula

Congregational Church was involuntarily dissolved for failure to

file "annual corporation exhibits" for "at least two years" and

"the directors of the corporation [were to] act as Trustees for

the creditors and stockholders" pursuant to Hawai‘i Revised

Statutes (HRS) § 416-123 (1976, repealed 1987). Hauula

Congregational Church was the sole owner of the Property until

its dissolution.

Hau‘ula Congregational Church, United Church of Christ

was incorporated in June 1997, as a purported "reincorporation"

2 Two of the grants stated the land was to "be used for church purposes only," otherwise it would revert to the Territory or be recoverable "by the Territory or its successors in an" ejectment action or other appropriate proceeding. 2 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

of Hauula Congregational Church. In September 2008, Hau‘ula

Congregational Church, United Church of Christ recorded a

warranty deed in the Bureau of Conveyances granting the entirety

of the Property to Hawaii Conference as a tenant in severalty,

even though there was no document conveying the Property from

Hauula Congregational Church to Hau‘ula Congregational Church,

United Church of Christ.

On December 10, 2018, Kamai-Kaaihue filed articles of

incorporation for Hau‘ula Kahuku Church with the Department of

Commerce and Consumer Affairs, noting she was the registered

agent and listing herself, Takemoto, and Kathleen Takemoto as

incorporators. Starting in December 2018, Defendants

purportedly entered the Property, parking vehicles and occupying

"the church building without" Hawaii Conference's permission.

In April 2019, Hawaii Conference filed a complaint for

trespass to land and intentional damage to property in circuit

court (Trespass Proceeding), requesting declaratory judgment,

injunctive relief, and damages.

About a year later, Hawaii Conference initiated a

special proceeding in circuit court seeking "Appointment of a

Receiver for Hau‘ula Congregational Church" to resolve, inter

alia, the gap in title to the Property (Special Proceeding).

The circuit court appointed a receiver, vesting him with "full

power and authority to execute all instruments and take all

3 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

actions necessary to resolve unfinished business and wind up the

affairs of the Church[.]"

On April 22, 2020, Hawaii Conference moved for partial

summary judgment in the Trespass Proceeding. The following day,

the receiver recorded a quitclaim deed conveying the Property

from "Hau‘ula Congregational Church" to Hawaii Conference in the

Bureau of Conveyances.

In May 2020, the circuit court consolidated the

proceedings with the Trespass Proceeding as the primary case.

Both sides moved for summary judgment. At the August 13, 2020

hearing on the summary judgment motions, the circuit court noted

it was granting Hawaii Conference's summary judgment motion as

to all counts of the complaint except damages because damages by

Defendants, if any, had not been proven. On September 29, 2020,

the circuit court entered its Summary Judgment Order, granting

in part and denying in part Hawaii Conference's motion and

denying Defendants' motion.

Following the Summary Judgment Order, the circuit

court entered the parties' Stipulated Judgment in favor of

Hawaii Conference on all counts with nominal damages of $1.00

and costs of $7,051.25 taxed against Defendants. The circuit

court's minutes note that trial was taken off the calendar.

4 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Defendants timely appealed. Defendants raise nine

points of error 3 while Hawaii Conference contests this court's

3 Defendants' nine points of error are as follows:

A. "The trial court erred when it construed the nonprofit corporation's charter to mean that the charter prohibits the distribution of the dissolved nonprofit corporation's land to its members";

B. "The trial court erred in refusing to apply Chapter 416, HRS (1976 replacement), which was the law in effect at the time of the nonprofit corporation's dissolution, and in refusing to fashion a remedy under that law";

C. "The trial court erred in refusing to consider [Hawai‘i] judicial precedent on the dissolution of a corporation as guidance in the interpretation and application of the 'hybrid' statute to the dissolved nonprofit corporation";

D. "The trial court erred in holding that the dissolved nonprofit corporation continued to exist without end, even if more than 40 years had passed since its dissolution in 1977";

E. "The trial court erred in applying Chapter 414D, HRS (effective July 1, 2002) to the winding up of the dissolved nonprofit corporation's affairs and to the distribution of its land";

F. "The trial court erred in holding (1) that the former Hauula-Kahuku Church was or is a 'public benefit corporation,' (2) that the distribution of the dissolved nonprofit corporation's land is to be undertaken pursuant to section 414D-245(a)(6), HRS and not pursuant to section 414D-245(a)(7), HRS, (3) that the Plaintiff is entitled to the distribution of the [Property] and (4) that the Defendants have no interest in the [Property]";

G. "The trial court erred when it allowed its receiver to deliver a deed for the [Property] without a prior hearing, without the trial court's prior approval, without notice to the pool of persons who may be interested in the distribution and to the wrong person";

H. "The trial court erred by not assembling a proper pool of interested persons for the distribution of the dissolved nonprofit corporation's land"; and

(continued . . .)

5 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

jurisdiction. We address (1) Hawaii Conference's challenge to

jurisdiction, and consolidate Defendants' nine points of error

as challenging (2) the application of HRS Chapter 414D (Points

A-F) and (3) the conveyance of title (Points G-I).

Upon careful review of the record and the briefs

submitted by the parties and having given due consideration to

the issues raised and the arguments advanced, we resolve this

appeal as discussed below, and affirm.

(1) We first address Hawaii Conference's assertion

this court lacks jurisdiction because the Stipulated Judgment

"was actually a judgment entered on consent of the parties and

is not appealable."

Contrary to Hawaii Conference's assertion, this court

has jurisdiction over this case. The Stipulated Judgment stated

it "finally disposes of all claims and all parties in this case.

There are no other parties [or] claims remaining, and all other

claims and parties not addressed in this Judgment, if any, are

hereby dismissed." Because the Stipulated Judgment was a final

judgment that disposed of all claims as to all parties in this

(. . . continued)

I. "The trial court erred when it held that the Plaintiff owns the [Property] and when it entered its further conclusions, orders, writ and judgment based on that error."

(Formatting altered.) Defendants also challenge various findings of fact and conclusions of law in their points of error but do not make arguments related to specific findings or conclusions. Hawai‘i Rules of Appellate Procedure Rule 28(b)(7). 6 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

case, and Defendants timely appealed, we have jurisdiction. See

Jenkins v. Cades Schutte Fleming & Wright, 76 Hawai‘i 115, 119,

869 P.2d 1334, 1338 (1994); Hawai‘i Rules of Civil Procedure

Rules 54(b), 58; and Hawai‘i Rules of Appellate Procedure

Rule 4(a)(1).

As Hawaii Conference acknowledged in its memorandum in

support of its motion to dismiss for lack of appellate

jurisdiction, following the circuit court's ruling on the

summary judgment motions, "the parties stipulated to nominal

damages of $1.00, and [Hawaii Conference's] entitlement to costs

of $7,051.25." Defendants do not raise a point of error related

to the stipulated damages and costs.

Instead, Defendants' points of error primarily

challenge the circuit court's Summary Judgment Order. The

record does not show Defendants gave up their right to appeal

this order. See R2B Invs., LLC v. Reynolds, 133 Hawai‘i 452, 330

P.3d 390, No. CAAP-XX-XXXXXXX, 2014 WL 2007001 at *1, 2, 7 (App.

May 14, 2014) (Mem. Op.) (indicating agreement to waive right to

appeal must be express); Ueoka v. Szymanski, 107 Hawai‘i 386,

396, 114 P.3d 892, 902 (2005). We thus address Defendants'

contentions.

(2) Defendants contend the circuit court erred in

applying HRS Chapter 414D (Point E); should have applied HRS

Chapter 416 (Points A-D); and even if HRS Chapter 414D applied,

7 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

the court should have applied subsection (a)(7), not (a)(6), of

HRS § 414D-245 (Supp. 2019) (Point F). The gist of Defendants'

argument is that Kamai-Kaaihue has "an inheritable property

interest in the dissolved nonprofit corporation's land by,

through and under her parents" who were members when Hauula

Congregational Church was dissolved in 1977. Contrary to

Defendants' contention, the circuit court did not err.

First, the circuit court did not err in applying HRS

Chapter 414D. The 1916 Charter stated it was "subject to all

existing laws and all laws, whether amendatory, repealing or

other laws that may here-after be enacted applicable to charters

or corporations of this character." HRS Chapter 416 was

repealed in 1987. 1987 Haw. Sess. Laws Act 135, § 208 at 308.

And HRS Chapter 414D applied to Hawai‘i nonprofit corporations

when the circuit court appointed a receiver to wind up Hauula

Congregational Church's unfinished business. See HRS § 414D-321

(2004). The church here was a nonprofit corporation. Thus, the

circuit court did not err in applying HRS Chapter 414D.

But, even if HRS Chapter 416 applied in 2020 as

Defendants contend, it does not support Kamai-Kaaihue's

assertion that she inherited a property interest through her

church-member parents. HRS § 416-124 (1976, repealed 1987)

provided a dissolved corporation's trustee(s) can distribute the

entity's remaining assets to its members "if under the charter

8 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

of the corporation the members are entitled to a distribution of

the remaining property of the corporation[.]" Here, the 1916

Charter did not indicate members were entitled to a distribution

of remaining assets upon dissolution, but instead stated "[n]o

stock shall be issued nor dividends paid by the corporation."

And, the bylaws indicated board members were to "serve without

compensation." Further, neither document indicated membership

could be transferred or inherited. See generally Wier v. Howard

Hughes Med. Inst., 407 A.2d 1051, 1054-55 (Del. Ch. 1979)

(stating unless the corporate charter or bylaws of a non-stock

corporation expressly provide, membership in the corporation

"may not be transferred or inherited"). Thus, as the 1916

Charter and bylaws did not provide for transfer of membership or

distribution of assets upon dissolution, HRS § 416-124 would not

allow Kamai-Kaaihue to inherit an interest in the Property.

Finally, HRS § 414D-245(a)(6) and (a)(7) (Supp. 2019)

explain how a dissolved nonprofit corporation can dispose of its

assets if its articles or bylaws do not indicate how assets are

to be disposed of after dissolution:

(a) A dissolved corporation continues its corporate existence but shall not carry on any activities except those appropriate to wind up and liquidate its affairs, including . . . .

(6) If the corporation is a public benefit corporation and no provision has been made in its articles or bylaws for distribution of assets on dissolution, transferring, subject to any contractual or legal requirement, its assets to one or more persons described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or if the dissolved 9 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

corporation is not described in Section 501(c)(3) of the Internal Revenue Code, to one or more public benefit corporations; [and]

(7) If the corporation is not a public benefit corporation and no provision has been made in its articles or bylaws for distribution of assets on dissolution, transferring its assets to its members or, if it has no members, to those persons whom the corporation holds itself out as benefiting or serving[.]

(Emphases added.) A public benefit corporation includes a

corporation recognized as exempt under Internal Revenue Code

section 501(c)(3):

"Public benefit corporation" means any corporation designated by statute as a public benefit corporation, or any corporation that is recognized as exempt under section 501(c)(3) of the Internal Revenue Code of 1986, as amended, or that is organized for public or charitable purposes and upon dissolution must distribute its assets to a public benefit corporation, the United States, a state, or a person recognized as exempt under section 501(c)(3) of the Internal Revenue Code of 1986, as amended.

HRS § 414D-14 (2004) (emphasis added).

Again, the 1916 Charter and bylaws did not provide for

the distribution of assets upon dissolution. Because the entity

here operated as a nonprofit corporation "organized and operated

exclusively for religious, charitable" purposes outlined in 26

U.S.C. § 501(c)(3), its assets would be subject to distribution

under HRS § 414D-245(a)(6). See 26 U.S.C. § 501(c)(3) (2019)

(providing that "[c]orporations . . . organized and operated

exclusively for religious, charitable . . . purposes" are

"exempt from taxation . . . unless such exemption is denied").

HRS § 414D-245(a)(7), on the other hand, applies to corporations

that are not public benefit corporations. The circuit court

10 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

therefore did not err in applying HRS § 414D-245(a)(6) as Hauula

Congregational Church met the definition of a public benefit

corporation.

In sum, Defendants did not establish that Kamai-

Kaaihue was entitled to distribution of the Property through her

church-member parents.

(3) Defendants also contend the circuit court erred in

allowing the receiver to deed the Property without notifying and

assembling a pool of interested persons.

The circuit court was vested with authority to appoint

a receiver to do what was necessary to settle the corporation's

unfinished business:

When any corporation organized under the laws of this State . . . shall have been dissolved . . . , the circuit court, upon application of any creditor, member, or director of the corporation, or any other person who shows good cause therefor, and upon a finding that the persons responsible for settling the unfinished business and winding up the affairs of the corporation either are not diligently pursuing such obligations, or cannot be found or otherwise are not available, may either appoint one or more of the directors of the corporation to be trustees or appoint one or more persons to be receivers of and for the corporation, to do all acts that are necessary for the final settlement of the unfinished business of the corporation. The powers of the trustees or receivers shall be effective for the time period determined by the circuit court.

HRS § 414D-245.5(a) (2004) (emphases added).

Here, the circuit court's order appointing the

receiver stated the receiver had "full power and authority to

execute all instruments and take all actions necessary to

resolve unfinished business and wind up the affairs of the

11 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Church, in the name and on behalf of the Church." One bit of

unfinished business was disposing of Hauula Congregational

Church's assets. Under HRS § 414D-245(a)(6), the receiver could

only transfer Hauula Congregational Church's assets to another

person or entity described in Internal Revenue Code section

501(c)(3) or to another public benefit corporation. As Hawaii

Conference was a 501(c)(3) entity, the receiver complied with

HRS § 414D-245(a)(6) when he deeded the Property to Hawaii

Conference.

As to notice, Defendants acknowledge they received

notice, but argue there were other church members who may have

been interested in the Property, as well as the Association of

Hawaiian Evangelical Churches and the State of Hawai‘i, who

should have been notified. As discussed, Defendants failed to

show there was a basis for individuals to inherit an interest in

the Property through persons who were church members at the time

of dissolution. And the record in this case indicates the

Association of Hawaiian Evangelical Churches and the State of

Hawai‘i were aware of the Special Proceeding to appoint a

receiver, as the Association of Hawaiian Evangelical Churches

filed a declaration in the Special Proceeding and Hawaii

Conference served Clare E. Conners, then-Attorney General for

12 NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

the State of Hawai‘i, with its application for appointment of a

receiver. Thus, there was no error regarding notice.

Based on the foregoing, we affirm the circuit court's

September 29, 2020 Summary Judgment Order and the November 24,

2020 Stipulated Judgment.

DATED: Honolulu, Hawai‘i, November 12, 2024.

On the briefs: /s/ Katherine G. Leonard Acting Chief Judge Michael J. Matsukawa, for Defendants-Appellants. /s/ Clyde J. Wadsworth Associate Judge Diane D. Hastert, Douglas C. Smith, /s/ Sonja M.P. McCullen Gregory W. Kugle, and Associate Judge Ross Uehara-Tilton, (Damon Key Leong Kupchak Hastert), for Plaintiff-Appellee.