PL III, LLC v. Puu Lani Ranch Corp.

560 P.3d 483, 155 Haw. 228

• Court: Hawaii Intermediate Court of Appeals
• Decided: December 23, 2024
• Docket: CAAP-21-0000669
• Status: Published

Opinion

NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

Electronically Filed Intermediate Court of Appeals CAAP-XX-XXXXXXX 23-DEC-2024 08:01 AM Dkt. 81 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI‘I

PL III, LLC, a Hawaii limited liability company; ARICK B. YANAGIHARA; MICHAEL H. NEKOBA; WILLIAM G. BOYLE; and ANITA MATSUZAKI, Plaintiffs/Counterclaim Defendants-Appellants, v. PUU LANI RANCH CORP., a Hawaii Corporation, Defendant/Counterclaimant-Appellee, and F. NEWELL BOHNETT, as Trustee under that certain unrecorded Revocable Living Trust Agreement dated July 29, 1981, made by F. Newell Bohnett, as Settlor; and F. NEWELL BOHNETT, in his individual capacity, Defendants-Appellees, and DOE COUNTERCLAIM DEFENDANTS 1-20, Defendants

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT (CASE NO. 3CC11100433K)

SUMMARY DISPOSITION ORDER (By: Hiraoka, Presiding Judge, McCullen and Guidry, JJ.)

Plaintiffs/Counterclaim Defendants-Appellants PL III,

LLC, Arick B. Yanagihara, Michael H. Nekoba, William G. Boyle, NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

and Anita Matsuzaki1 appeal from the Judgment Confirming

Arbitration Award (Judgment) entered in favor of

Defendant/Counterclaimant-Appellee Puu Lani Ranch Corp., and

Defendant-Appellee F. Newell Bohnett, individually and as

trustee (collectively Puu Lani Ranch), on October 25, 2021 in

the Circuit Court of the Third Circuit (circuit court).2

I. BACKGROUND

This case concerns Plaintiffs' ongoing challenge to an

arbitration award resolving a dispute over real property on the

island of Hawaiʻi (the Property). The Property was purchased

through a promissory note and mortgage entered into between

mortgagor/borrower PL III, and mortgagee/lender Puu Lani Ranch.

The individual Plaintiffs signed an April 2, 2007 Guaranty (the

Guaranty), in which they "jointly and severally, unconditionally

and irrevocably guarantee[d] . . . the punctual payment in full

of the principal, interest and all other sums due and to become

due" to Puu Lani Ranch.

In an attempt to resolve the dispute, the parties

stipulated in July 2013 to submit their dispute to binding

1 PL III, LLC is referred to herein as PL III. Arick B. Yanagihara, Michael H. Nekoba, William G. Boyle, and Anita Matsuzaki are collectively referred to as the individual Plaintiffs. PL III and the individual Plaintiffs are collectively referred to as Plaintiffs.

2 The Honorable Robert D.S. Kim presided. 2 NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

arbitration before Judge Patrick K.S.L. Yim (retired)

(Arbitrator Yim). In December 2013, Arbitrator Yim issued a

Partial Final Award denying Plaintiffs' claims and awarding Puu

Lani Ranch $2,086,684.05, plus $525.35 per day, for every day

after November 1, 2023, until the total amount due is paid, and

attorney's fees and costs (Arbitration Award).

Puu Lani Ranch moved to confirm the Arbitration Award;

Plaintiffs moved to vacate the award. The circuit court granted

Puu Lani Ranch's motion, and in June 2014 issued its Judgment.

Plaintiffs appealed. In PL III, LLC v. Puu Lani Ranch Corp.,

No. CAAP-XX-XXXXXXX, 2019 WL 2281269 (mem. op.) (Haw. App.

May 29, 2019), this court affirmed in part and vacated in part.

This court remanded the case to the circuit court, instructing

the circuit court to determine whether Arbitrator Yim made a

timely and sufficient initial disclosure to Plaintiffs regarding

his association with the Institute for Human Services (IHS), and

whether the circumstances surrounding donations allegedly made

by the Cades Schutte LLP (Cades) law firm to IHS gave rise to a

reasonable impression of partiality by Arbitrator Yim. This

court specifically provided the following remand instructions to

the circuit court,

Following the supreme court's example in Nordic [PCL Constr., Inc. v. LPIHGC, LLC, 136 Hawaiʻi 29, 51, 53, 358 P.3d 1, 23, 25 (2015)], on remand, the circuit court should

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conduct an evidentiary hearing to determine as necessary the timing and sufficiency of the initial disclosure regarding Arbitrator Yim's association with IHS, Plaintiffs' actual or constructive knowledge of Arbitrator Yim's involvement with IHS and the donations received from Cades, the timing and amounts of the donations received from Cades, and whether Plaintiffs have met their burden of proving facts which would establish a reasonable impression of partiality on this issue.

PL III, 2019 WL 2281269, at *7.

On remand, the circuit court held an evidentiary

hearing in May 2021; the hearing was limited to the issues

identified by this court in its remand instructions. The

circuit court issued its "Findings of Fact [(FOF)], Conclusions

of Law [(COL)], and Order Denying Plaintiffs' Motion to Vacate

Arbitration Awards" (FOF/COL/Order) on September 22, 2021. The

FOF/COL/Order concluded that "Plaintiffs [did] not carr[y] their

burden of proving that [Arbitrator Yim] failed to disclose facts

that would establish a reasonable impression that [Arbitrator

Yim] was biased or partial from the perspective of an objective

litigant in Plaintiffs' position." Plaintiffs moved for

reconsideration, and for a stay of the proceedings to collect on

the individual Plaintiffs' Guaranty of the underlying promissory

note and mortgage, which the circuit court denied.

The circuit court issued its Judgment, and this appeal

followed.

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II. POINTS OF ERROR

Plaintiffs raise five points of error on appeal,

contending that the circuit court erred: (1) when it granted Puu

Lani Ranch's Motion in Limine no. 2; (2) in failing to make

adequate FOF; (3) in denying Plaintiffs' request to admit

exhibits 30, 31, and 32 into evidence; (4) in its COL nos. 10,

11, 12, 13, 14, 15, 19, and 20, of its FOF/COL/Order; and (5) in

denying Plaintiffs' October 4, 2021 Motion For Stay of

Proceedings to Collect Moneys Due on Alleged Breach of

Plaintiffs' Guarantee Until the Court Grants a Motion for a

Deficiency Judgment (Motion to Stay).

Upon careful review of the record and relevant legal

authorities, and having given due consideration to the arguments

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

Plaintiffs' contentions as follows:

(1) Plaintiffs' first three points of error relate to

their contention that the circuit court erroneously failed to

consider evidence as to Cades' separate legal representation of

the Queen Liliʻuokalani Trust (QLT) and Chaminade University, and

testimony that Arbitrator Yim had met with a Cades attorney

representing QLT at the time he served as a QLT trustee.

As discussed supra, this court in PL III instructed

the circuit court to consider discrete issues related to 5 NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

Arbitrator Yim's alleged involvement with IHS. Namely, this

court instructed the circuit court to do the following on

remand: (1) review the timing and sufficiency of Arbitrator

Yim's initial disclosure of his association with IHS; (2)

determine Plaintiffs' actual or constructive knowledge of

Arbitrator Yim's involvement with IHS and donations to IHS from

Cades; (3) determine the timing and amount of Cades' donations

to IHS; and (4) determine whether Plaintiffs can prove facts

establishing a reasonable impression of partiality based on

Cades' donations to IHS and Arbitrator Yim's involvement with

IHS. PL III, 2019 WL 2281269, at *7.

In Chun v. Bd. of Trs. of Emps.' Ret. Sys. of State of

Haw., the Hawai‘i Supreme Court explained a trial court's mandate

on remand as follows,

[I]t is the duty of the trial court, on remand, to comply strictly with the mandate of the appellate court according to its true intent and meaning, as determined by the directions given by the reviewing court, and . . . when acting under an appellate court's mandate, an inferior court cannot vary it, or examine it for any other purpose than execution; or give any other or further relief; . . . or intermeddle with it, further than to settle so much as has been remanded.

106 Hawaiʻi 416, 439, 106 P.3d 339, 362 (2005) (cleaned up).

We conclude that the circuit court did not err by

rejecting Plaintiffs' attempts to raise issues outside the scope

6 NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

of this court's remand instructions.3 The circuit court did not

err by refusing to consider evidence and testimony relating to

QLT and Chaminade University, which were plainly outside the

scope of remand, and in therefore declining to address those

issues in its FOF.

Plaintiffs' first, second, and third points of error

lack merit.

(2) Plaintiffs' fourth point of error contends that

the circuit court erred in its COL nos. 10—15, 19, and 20. We

review the circuit court's COL de novo, under the right/wrong

standard. Noel Madamba Contracting LLC v. Romero, 137 Hawaiʻi 1,

8, 364 P.3d 518, 525 (2015). We review COL that present mixed

questions of law and fact under the clearly erroneous standard.

Id.

The challenged COL state,

10. The party challenging an arbitration award has the "'burden of proving facts which would establish a reasonable impression of partiality,' which constitutes 'evident partiality.'" PL III, LLC v. Puu Lani Ranch Corp., 2019 WL 2281269, at *4 (quoting Naravan, 140 Hawaiʻi at 86, 398 P.3d at 675 (2017)).

11. Plaintiffs have not alleged or offered any evidence which would establish that [Arbitrator Yim] failed to disclose a "direct and material financial or personal interest in the outcome of the arbitration proceeding" as set forth in HRS § 658A-12(a)(1).

3 In July 2021, during the pendency of the circuit court remand proceedings, Plaintiffs filed a Motion to Instruct Circuit Court to Expand Scope of Evidentiary Hearing on Remand with this court. The motion was denied, for lack of jurisdiction. 7 NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

12. Plaintiffs have alleged but failed to present any evidence which would establish that [Arbitrator Yim] had an undisclosed "existing or past relationship with any of the parties to the agreement to arbitrate or the arbitration proceeding, their counsel or representatives, a witness, or another arbitrator" necessitating disclosure in this case. See HRS § 658A-12(a)(1). [Arbitrator Yim]'s past service on the Board of Directors of IHS did not in and of itself constitute "an existing or past relationship" with any party to the arbitration or the counsel for any party to the arbitration.

13. Plaintiffs have not proven facts that would establish evident partiality by virtue of nondisclosure by [Arbitrator Yim] of facts identified in HRS §§ 658A- 12(a)(1) or 658A-12(a)(2).

14. Further, Plaintiffs have not proven facts that would establish a reasonable impression of possible bias by [Arbitrator Yim] necessitating disclosure in connection with donations by the Cades Foundation to IHS.

15. Plaintiffs have not presented evidence or proven that [Arbitrator Yim] had any knowledge of the donations by the Cades Foundation to IHS. [Arbitrator Yim] only had a duty to disclose facts known to him after conducting a reasonable inquiry.

. . . .

19. The amount and timing of the consistent annual donations from the Cades Foundation to IHS, which began before [Arbitrator Yim] joined the Board of Directors of IHS and which continued after [Arbitrator Yim] resigned from IHS, corroborate [Arbitrator Yim]'s testimony that he had no role in soliciting or obtaining donations from the Cades Foundation to IHS.

20. In sum, Plaintiffs have not carried their burden of proving that [Arbitrator Yim] failed to disclose facts that would establish a reasonable impression that [Arbitrator Yim] was biased or partial from the perspective of an objective litigant in Plaintiffs' position.

As explained supra, in section (1), this court had

limited the remand proceedings to the circuit court's review of

Arbitrator Yim's disclosures to Plaintiffs concerning his

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association with IHS, Plaintiffs' knowledge of Arbitrator Yim's

association with IHS and any donations that Cades had made to

IHS, the timing and amounts of donations by Cades to IHS, and

"whether Plaintiffs have met their burden of proving facts which

would establish a reasonable impression of [Arbitrator Yim's]

partiality on this issue." PL III, 2019 WL 2281269, at *7.

The challenged COL relate to the circuit court's

conclusions on the above issues. These COL are supported by the

circuit court's unchallenged FOF that state, inter alia:

Arbitrator Yim had resigned from the Board of Directors of IHS

in 2008, five years before he was appointed as arbitrator in

this matter; there was no evidence that Cades made any donations

to IHS; that the Cades Foundation was a nonprofit corporation

whose sole source of funding was charitable donations by members

of the Cades family, that the Cades Foundation was a separate

entity from Cades, and that Cades has never donated money to the

Cades Foundation; and Arbitrator Yim had no role in soliciting

donations from the Cades Foundation, and no personal knowledge

of donations made by the Cades Foundation to IHS.

The circuit court's unchallenged FOF are binding on

this court. Kawamata Farms, Inc. v. United Agri Prods.,

86 Hawaiʻi 214, 252, 948 P.2d 1055, 1093 (1997) ("If a finding is

not properly attacked, it is binding; and any conclusion which 9 NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

follows from it and is a correct statement of law is valid.")

(citation omitted).

We conclude that the circuit court's COL nos. 10—15,

19, and 20 are not wrong and, to the extent they present mixed

questions of law and fact, are not clearly erroneous.

(3) Plaintiffs' fifth point of error contends that the

circuit court erred in denying their Motion to Stay, on the

theory that the Guaranty could only be enforced after entry of a

deficiency judgment. A grant or denial of a motion to stay is

reviewed for abuse of discretion. Citimortgage, Inc. v. Brum,

No. CAAP-XX-XXXXXXX, 2024 WL 2292576, at *1 (Haw. App. May 21,

2024) (SDO).

In the proceedings underlying PL III, the circuit

court granted Plaintiffs' initial request to stay the

proceedings to enforce the individual Plaintiffs' Guaranty.

Noting Arbitrator Yim's determination that Puu Lani Ranch "was

entitled to both a money award and to have the mortgage

foreclosed," this court concluded in PL III that,

The sequence in which the foreclosure and the money award were to be enforced was not explicitly addressed by Arbitrator Yim in the arbitration award. Therefore, staying collection of the money award against the other Plaintiffs until the sale of the subject property and the application of the proceeds of the sale to the money award is not contrary to nor a modification of the arbitration award. Therefore, the circuit court did not abuse its discretion by granting a stay of execution of the Judgment pending sale as it did not modify or change the arbitration awards and was consistent with Arbitrator Yim's determinations. 10 NOT FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

2019 WL 2281269, at *10 (emphasis added).

On remand, Plaintiffs once again moved the circuit

court to stay the proceedings to enforce the individual

Plaintiffs' Guaranty. This time the circuit court denied

Plaintiffs' request. Although the circuit court's ruling was

different this time, we find that, as in PL III, the circuit

court's ruling "did not modify or change the arbitration awards

and was consistent with Arbitrator Yim's determinations." See

Puu Lani Ranch's money award was premised on

Arbitrator Yim's finding, in his Partial Final Award, that the

individual Plaintiffs jointly and severally "guarantee[d] . . .

the punctual payment in full of the principal, interest and all

other sums due and to become due" to Puu Lani Ranch. Arbitrator

Yim further found the individual Plaintiffs agreed, as

guarantors, that their obligations under the Guaranty were

"independent of the obligations of Borrower [i.e., PL III]," and

that "Lender [i.e., Puu Lani Ranch] may bring and prosecute a

separate action or actions against Guarantors whether or not

Borrower is joined therein or a separate action or actions [are]

brought against Borrower."

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Where a lender can pursue separate actions against a

guarantor and a borrower, these actions may be brought

simultaneously. See Restatement (Third) of Property (Mortgages)

§ 8.2 cmt. b (Am. L. Inst. 1997) ("This section does not

prohibit the mortgagee from proceeding against the mortgagor

under either Subsection (a) or Subsection (b) while

simultaneously bringing an action or proceeding to enforce the

obligation against a guarantor or surety.").

The circuit court's denial of Plaintiffs' Motion to

Stay did not constitute an abuse of discretion.

III. CONCLUSION

For the foregoing reasons, we affirm the circuit

court's Judgment.

DATED: Honolulu, Hawaiʻi, December 23, 2024.

On the briefs: /s/ Keith K. Hiraoka Presiding Judge Keith M. Kiuchi, for Plaintiffs/Counterclaim /s/ Sonja M.P. McCullen Defendants-Appellants. Associate Judge

Kirk M. Neste, /s/ Kimberly T. Guidry for Defendant/ Associate Judge Counterclaimant-Appellee.