Oyadomari v. HQHQ, Inc.

Hawaii Intermediate Court of Appeals·Decided June 21, 2023·No. CAAP-17-0000924·Published

Opinion

Electronically Filed

Intermediate Court of Appeals CAAP-XX-XXXXXXX

21-JUN-2023

07:58 AM

Dkt. 153 MO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS OF THE STATE OF HAWAI‘I

SHARMAN M. OYADOMARI, Trustee of the Kikuko Kuwahara Irrevocable Grantor Trust dated April 26, 2013, Plaintiff-Appellee, v. HQHQ, INC., a Hawai‘i corporation; and WILLIAM S. QUINN, Defendants-Appellants, and BRIAN M. HYATT; and DOE DEFENDANTS 1-10, Defendants-Appellees.

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT (CIVIL NO. 3CC16-1-000411)

Memorandum Opinion

(By: Ginoza, Chief Judge, Wadsworth and McCullen, JJ.)

Defendants-Appellants HQHQ, Inc. (HQHQ) and William S.

Quinn (Quinn) appeal from nine orders and judgments of the Circuit Court of the Third Circuit involving judicial foreclosure and confirmation of sale proceedings brought by Plaintiff-Appellee Sharman M. Oyadomari (Oyadomari). 1

1 HQHQ and Quinn appeal from the following orders and judgments:

(1) October 13, 2017 "Order Denying Defendant William S.

Quinn's Motion for Order Compelling Plaintiff Sharman M. Oyadomari, Trustee to Accept Full Payment of

(continued . . .)

On appeal, HQHQ and Quinn raise two points of error, alleging (1) the circuit court erred in failing to grant relief from the interlocutory decree of foreclosure and (2) all orders

(. . . continued)

the June 20, 2008 Promissory Note, Filed on October 9, 2017 and Granting Plaintiff's Motion to Confirm Sale, Filed on July 31, 2017";

(2) November 24, 2017 "Order Denying Motion for Leave to File Defendant William S. Quinn's Counterclaim and Crossclaim, Filed on October 10, 2017 and Motion for Reconsideration of October 13, 2017 Ruling Denying Defendant William S. Quinn's Motion for Order Compelling Plaintiff Sharman M. Oyadomari, Trustee to Accept Full Payment of June 20, 2008 Promissory Note (and Objection to Plaintiff's Notice of Submission Dated October 24, 2017[)], Filed on November 2, 2017";

(3) November 28, 2017 "Order Denying Defendant William S.

Quinn's Motion for Order Compelling Plaintiff Sharman M. Oyadomari, Trustee to Accept Full Payment of the June 20, 2008 Promissory Note";

(4) November 28, 2017 "Findings of Fact [(FOF)], Conclusions of Law and Order Granting Plaintiff's Motion to Confirm Sale";

(5) November 28, 2017 Writ of Possession;

(6) November 28, 2017 Judgment;

(7) January 24, 2018 "Order Granting Plaintiff's Motion to Alter or Amend Findings of Fact, Conclusions of Law and Order Granting Plaintiff's Motion to Confirm Sale Filed November 28, 2017";

(8) January 24, 2018 "Order Denying Defendant William S.

Quinn's Motion to Strike Plaintiff's Motion to Alter or Amend Findings of Fact, Conclusions of Law and Order Granting Plaintiff's Motion to Confirm Sale Filed November 28, 2017"; and

(9) January 24, 2018 Amended Judgment.

The Honorable Harry P. Freitas presided over the October 13, 2017 order denying Quinn's motion to compel Oyadomari to accept full payment and granting Oyadomari's motion to confirm the sale.

The Honorable Henry T. Nakamoto presided over all other orders and judgments.

entered after the October 13, 2017 order require reversal. We affirm.

I. BACKGROUND

A. Factual Background According to Quinn, his family founded Pahoa Feed and Fertilizer as a sole proprietorship in 2000. Quinn explains that, in 2002, Brian M. Hyatt's (Hyatt) family and Quinn's family incorporated Pahoa Feed and Fertilizer under HQHQ, Inc., a Hawai‘i corporation, consisting of a 50-50 ownership between the two families.

On June 20, 2008, HQHQ executed a promissory note (Note), promising to repay Yoso and Kikuko Kuwahara (Kuwaharas), in their capacity as trustee of their respective revocable living trusts, for a $445,000.00 loan with an interest rate of six percent per year. The Note required HQHQ to pay the Kuwaharas $3,500.00 every month until June 6, 2015, at which time HQHQ would be required to pay the balance of the Note.

Quinn and Hyatt each personally guaranteed HQHQ's obligations under the Note. FOF 4. The loan was secured with a Mortgage on a Property in Puna on the island of Hawai‘i. FOF 2, 3. The Mortgage was recorded in the Bureau of Conveyances on June 25, 2008.

Kikuko Kuwahara (in her capacity as Trustee of the Kikuko Kuwahara Revocable Living Trust Agreement dated

September 15, 1986, as amended, and as Successor Trustee of the Yoso Kuwahara Revocable Living Trust dated March 3, 1977, as amended) assigned the Note and Mortgage to Oyadomari in 2013, and recorded the assignment in the Bureau of Conveyances. Per this assignment, Oyadomari had "all right, title and interest in and to" the Note and Mortgage, including the "obligation and power to discharge Mortgage through the execution and delivery of a release of this Mortgage."

According to correspondence Quinn attached to his and HQHQ's memorandum in opposition to the commissioner's motion for leave to sell without an open house, Quinn and Oyadomari were negotiating the terms of a purchase money mortgage for the property in May 2015, a month before the Note became due. 2 On June 6, 2015, the Note became due with a principal balance of $312,305.73 and interest accruing at a rate of six percent per year. FOF 6, 9. HQHQ, Quinn, and Hyatt (collectively Defendants) failed to pay the amount owed. FOF 7.

In letters dated June 24, 2015 and February 19, 2016, Oyadomari made demands on Defendants to pay the balance due. FOF 7. Despite the demands for payment, Defendants "failed to pay the amounts owed under the Note." FOF 8.

2 Quinn represented to the circuit court that, around this time, the Hyatt and Quinn families realized "future business opportunities were best pursued separately as we were at an impasse regarding the direction of the business and did not work well as business partners." Quinn also submitted to the circuit court a letter from Hyatt indicating a willingness to relinquish his family's interest in HQHQ if certain demands were met.

Correspondence Quinn submitted to the circuit court indicated that the parties continued negotiating a new loan, but in June 2016, Oyadomari's attorney stated, "We have a foreclosure complaint that we are prepared to file but my client is willing to hold off on filing the complaint if a new loan can be closed by July 1, 2016" and set a June 17, 2016 deadline. On June 17, 2016, Quinn responded with modifications, to which Oyadomari was "not agreeable[.]" Oyadomari then proposed new terms that would expire at 4:30 p.m. on Friday, June 24, 2016. The correspondence provided by Quinn did not reflect a response. B. Procedural Background 1. The Complaint On November 29, 2016, Oyadomari filed her complaint for foreclosure in the circuit court against Defendants. Oyadomari contended Defendants were in "material default under the terms of the Note and the Mortgage[,]" therefore she was "entitled to foreclose upon the Mortgage and the subject property and to obtain a deficiency judgment, if appropriate, against Defendants."

2. Oyadomari's Motion for Summary Judgment and Interlocutory Decree of Foreclosure

On February 15, 2017, Oyadomari filed a motion for summary judgment and interlocutory decree of foreclosure. In her memorandum in support of the motion, Oyadomari stated she was entitled to summary judgment on her foreclosure claim

because she established the four material factual elements outlined in Bank of Honolulu v. Anderson, 3 Haw. App. 545, 550, 551, 654 P.2d 1370, 1374, 1375 (1982) (explaining that a party moving for summary judgment on a foreclosure claim must prove these material facts to prevail: "(1) the existence of the Agreement, (2) the terms of the Agreement, (3) default by [the mortgagor or debtor] under the terms of the Agreement, and (4) the giving of" requisite notice).

On April 19, 2017, the circuit court entered its "Findings of Fact, Conclusions of Law and Order Granting Plaintiff's Motion for Summary Judgment and Interlocutory Decree of Foreclosure." The circuit court concluded:

3. Plaintiff provided sufficient evidence of the existence and terms of the Note and Mortgage.

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