McKernan v. The Association of Apartment Owners of Kamaole Sands

514 P.3d 340, 151 Haw. 373

• Court: Hawaii Intermediate Court of Appeals
• Decided: August 8, 2022
• Docket: CAAP-19-0000608
• Status: Published

Opinion

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Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 08-AUG-2022 08:02 AM Dkt. 52 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI#I

DOREEN R. McKERNAN and MICHAEL S. McKERNAN, PlaintiffS-Appellees, v. THE ASSOCIATION OF APARTMENT OWNERS OF KAMAOLE SANDS, Defendant-Appellant, and JOHN DOES 1-100; JANE DOES 1-100; DOE PARTNERSHIPS 1-100; DOE CORPORATIONS 1-100; and DOE ENTITIES 1-100, Defendants

APPEAL FROM THE CIRCUIT COURT OF THE SECOND CIRCUIT (CIVIL NO. 18-1-0493(1))

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

Defendant-Appellant The Association of Apartment Owners

of Kamaole Sands (AOAO) appeals from the July 31, 2019 Order

Denying Defendant [AOAO]'s Motion to Dismiss Complaint Filed

December 21, 2018, or, in the Alternative, Stay Lawsuit and

Compel Arbitration (Order Denying Arbitration) entered by the

Circuit Court of the Second Circuit (Circuit Court)1 in favor of

1 The Honorable Rhonda I.L. Loo presided. NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

Plaintiffs-Appellees Doreen R. McKernan and Michael S. McKernan

(McKernans).

The AOAO raises a single point of error on appeal,

contending that the Circuit Court erred in entering the Order

Denying Arbitration, because Count I (Declaratory Relief), Count

II (Breach of Fiduciary Duty and Other Common Law Duties), Count

III (Breach of Contract, Breach of Governing Documents and

Protective Covenants, Conditions and Restrictions), Count IV

(Negligence), Count V (Specific Performance), Count VI

(Injunction/Constructive Eviction), Count VII (Equitable

Accounting), second Count VII (Violation of the Condominium Act),

and Count VIII (Breach of the AOAO's Declaration) of the AOAO's

First Amended Complaint for Damages and Declaratory Relief filed

on April 18, 2019 (Complaint) are not exempt from arbitration

pursuant to Hawaii Revised Statutes (HRS) § 514B-162(b)(4)

(2018), and should have been dismissed, or stayed and ordered to

arbitration pursuant to Section 28 of the AOAO's Declaration

and/or HRS § 514B-162(a) (2018).

Upon careful review of the record and the briefs

submitted by the parties, and having given due consideration to

the arguments advanced and the issues raised by the parties, we

resolve the AOAO's point of error as follows:

The AOAO argues that the Circuit Court erred in

entering the Order Denying Arbitration because the Complaint

includes arbitrable claims for relief, along with a claim for

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injunctive relief, which the AOAO acknowledges is exempt from

arbitration.

The parties agree that the AOAO and its members are

subject to the AOAO's Declaration, as amended (Declaration), and

Hawaii's Condominium Property Act, which is codified as HRS

Chapter 514B.

Section 28 of the Declaration provides: 28. Arbitration of Disputes. As, and to the extent, and in the manner, provided for in Part VII of Chapter 514A,[HRS], as amended, at the request of any party, any dispute concerning or involving one or more apartment owners and the Association, Board of Directors, Managing Agent or one or more other apartment owners relating to the interpretation, application or enforcement of the Condominium Property Act, this Declaration, the By-Laws or the administrative rules and regulations adopted in accordance with the By-laws shall be submitted to mediation and/or arbitration. The arbitration of appropriate disputes shall be conducted, unless otherwise agreed by the parties, in accordance with the rules adopted by the Real Estate Commission and the provisions of Chapter 658 [HRS]. {Part VII, HRS Chapter 514A}

After HRS Chapter 514A was repealed and replaced with

HRS Chapter 514B, effective July 1, 2005,2 the Declaration was

amended in 2007 to include, inter alia, Section 29 of the

Declaration, which provides in relevant part: 29. Governing Law. Notwithstanding anything herein or in the By-Laws to the contrary:

1. This Project shall be governed by the provisions of Hawaii Revised Statutes Chapter 514B, as amended to the fullest extent permitted by law[.]

Thus, pursuant to the unambiguous language of the

Declaration, as and to the extent provided in HRS Chapter 514B,

at the request of any party, any dispute concerning or involving

2 2004 Haw. Sess. Laws Act 164, § 2 at 796-98.

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the McKernans, who are apartment owners at Kamaole Sands, and the

AOAO, relating to the interpretation, application or enforcement

of the Condominium Property Act, the Declaration, the By-Laws or

the administrative rules and regulations adopted in accordance

with the By-laws must be submitted to mediation and/or

arbitration. The AOAO relies on this arbitration provision and

acknowledges that it is governed by HRS Chapter 514B.

HRS § 514B-162(a) includes a mandatory arbitration

provision:

§ 514B-162 Arbitration. (a) At the request of any party, any dispute concerning or involving one or more unit owners and an association, its board, managing agent, or one or more other unit owners relating to the interpretation, application, or enforcement of this chapter or the association's declaration, bylaws, or house rules adopted in accordance with its bylaws shall be submitted to arbitration. The arbitration shall be conducted, unless otherwise agreed by the parties, in accordance with the rules adopted by the commission and of chapter 658A; provided that the rules of the arbitration service conducting the arbitration shall be used until the commission adopts its rules; provided further that where any arbitration rule conflicts with chapter 658A, chapter 658A shall prevail; and provided further that notwithstanding any rule to the contrary, the arbitrator shall conduct the proceedings in a manner which affords substantial justice to all parties[.]

HRS § 514B-162(b) exempts certain disputes from

arbitration, including: (b) Nothing in subsection (a) shall be interpreted to mandate the arbitration of any dispute involving:

. . . .

(4) Actions seeking equitable relief involving threatened property damage or the health or safety of unit owners or any other person[.]

The dispute between the parties, as alleged in the

Complaint, involves several incidents where the McKernans'

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apartment was flooded with water and sewage, causing significant

damage, and posing a health hazard to the McKernans and their

guests. The Complaint alleges that wastewater pipes that serve

more than one unit are common elements that must be fully

investigated and repaired by the AOAO. As recognized by the

AOAO, Count VI of the Complaint seeks equitable relief ordering

that the AOAO take action and eliminate the continuing health

hazard posed by the raw sewage backups.

The AOAO does not dispute that Count VI falls within

the scope of HRS § 514B-162(b)(4). Rather, the AOAO contends

that all of the McKernans' other claims are arbitrable pursuant

to HRS § 514B-162(a). The McKernans submit that, as concluded by

the Circuit Court, pursuant to the plain language of HRS § 514B-

162(b), the Complaint falls squarely within HRS § 514B-162(b)(4)

and is therefore exempt from mandatory arbitration pursuant to

HRS § 514B-162(a). The Order Denying Arbitration states, in

part: . . . [The AOAO] argues that . . . [the Declaration] and [HRS] Section 514B-162(a) unambiguously requires arbitration.

[The McKernans] do not dispute that Section 28 of [the Declaration] provides an unequivocal mandatory dispute resolution process for disputes involving an owner and the AOAO relating to the interpretation, application or enforcement of the project's governing documents and Hawaii Condominium Property Act.

[The McKernans] argue, however, that the dispute falls under an exception to HRS Section 514B-162(b) and is not subject to mandatory arbitration. HRS 514B-162(b) does state that nothing in subsection (a) shall be interpreted to mandate the arbitration of any dispute involving actions seeking equitable relief involving threatened property damage or the health or safety of unit owners or any other person.

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The Court finds that the instant complaint squarely falls within the purview of HRS 514B-162(b), as it demands equitable relief in the form of the order directing [the AOAO] to inspect and repair or replace defective portions of the plumbing system and alleges that the sewage leaks causing property damage and the threat of the health and safety of the guests.

Questions of statutory interpretation are questions of

law to be reviewed de novo under the right/wrong standard. Ueoka

v. Szymanski, 107 Hawai#i 386, 392, 114 P.3d 892, 898 (2005).

When construing a statute, our foremost obligation is to

ascertain and give effect to the intention of the legislature,

which is to be obtained primarily from the language contained in

the statute itself. Bhakta v. Cnty. of Maui, 109 Hawai#i 198,

208, 124 P.3d 943, 953 (2005) (citation and internal quotation

marks omitted). Statutory construction is guided by the

following well established principles: [O]ur foremost obligation is to ascertain and give effect to the intention of the legislature, which is to be obtained primarily from the language contained in the statute itself. And we must read statutory language in the context of the entire statute and construe it in a manner consistent with its purpose.

When there is doubt, doubleness of meaning, or indistinctiveness or uncertainty of an expression used in a statute, an ambiguity exists[.]

Ueoka, 107 Hawai#i at 392-93, 114 P.3d at 898-99 (internal

citation omitted).

Here, the plain language of HRS § 514B-162(b)(4) is

clear and unambiguous. Like HRS § 514B-162(b)(5) & (b)(7),

(b)(4) exempts certain "actions" from the arbitration mandate in

subsection (a) of the statute. In contrast, HRS §§ 514B-

162(b)(6), exempts certain "claims" from mandatory arbitration.

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See generally HRS § 1-16 (2009) (laws in pari materia shall be

construed with reference to each other). It is well-established

in Hawai#i law, in a variety of contexts, that the term "action"

is synonymous with an entire "suit," as opposed to a claim or

claims, which might be prosecuted within an action or suit. See,

e.g., Leslie v. Estate of Tavares, 93 Hawai#i 1, 4, 994 P.2d

1047, 1050 (2000) (citations omitted) (discussing the definition

of "action"); see also Rapozo v. Better Hearing of Haw., LLC, 120

Hawai#i 257, 260, 204 P.3d 476, 479 (2009) (applying Leslie

definition to the term "action" in HRS § 481K-5(c) (Supp. 2007));

Nelson v. Univ. of Haw., 99 Hawai#i 262, 265, 54 P.3d 433, 436

(2002) (applying Leslie definition to the term "action" in

HRS § 378-5(c) (1993)); accord HRS § 490:1-201(1) (2008)

(regarding the definition of "action"); HRS § 658B-1 (2016)

(defining "action"); cf., e.g., Calleon v. Miyagi, 76 Hawai#i

310, 315-20, 876 P.2d 1278, 1283-88 (1994) (distinguishing

between different claims within a suit). Therefore, when

applicable, HRS § 514B-162(b)(4) applies to the action, not a

claim or claims within the action.

While the parties here were free to otherwise agree to

a different scope of mandatory arbitration, there is no evidence

or argument that they did so. Actions – not individual claims

within an action – seeking equitable relief involving threatened

property damage or the health or safety of unit owners or any

other person are statutorily exempted from the arbitration

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mandate in HRS § 514B-162(a). The McKernans' suit or action, as

set forth in the Complaint, seeks equitable relief involving

threatened property damage or the health or safety of the

McKernans and/or their guests. Thus, we conclude that the

Circuit Court did not err in rejecting the AOAO's argument that

certain claims within the suit were subject to mandatory

arbitration pursuant to HRS § 514B-162(a), based on the exemption

set forth in HRS § 514B-162(b)(4).3

Accordingly, the Circuit Court's July 31, 2019 Order

Denying Arbitration is affirmed.

DATED: Honolulu, Hawai#i, August 8, 2022.

On the briefs: /s/ Katherine G. Leonard Presiding Judge Wesley H.H.Ching, Nicholas P. Ching, /s/ Clyde J. Wadsworth (Fukunaga Matayoshi Ching Associate Judge & Kon-Herera), for Defendant-Appellant. /s/ Sonja M.P. McCullen Associate Judge Terrance M. Revere, Paul V.K. Smith, Magdalena Bajon, (Revere & Associates), for Plaintiffs-Appellees.

3 The AOAO's argument that the McKernans should be estopped from relying on HRS § 514B-162(b)(4) is raised for the first time on appeal and is deemed waived. See, e.g., Ass'n of Apartment Owners of Wailea Elua v. Wailea Resort Co., Ltd, 100 Hawai#i 97, 107, 58 P.3d 608, 618 (2002).