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Association of Apartment Owners of Royal Aloha v. Certified Management, Inc.

Intermediate Court of Appeals of Hawaii

June 30, 2016

ASSOCIATION OF APARTMENT OWNERS OF ROYAL ALOHA, a Hawai'i non-profit corporation, Plaintiff-Appellant,
v.
CERTIFIED MANAGEMENT, INC., a Hawai'i corporation; CHANEY BROOKS & COMPANY, LLC, a Hawai'i corporation; MICHAEL DAVID BRUSER, an individual; TOKYO JOE'S, INC., a Hawai'i corporation; MICHAEL T. MCCORMACK, individually and as Trustee under that certain unrecorded Michael T. McCormack Revocable Living Trust Agreement dated November 12, 1991; and MICHAEL T. MCCORMACK and SIGNA S. MCCORMACK, as Co-Trustees of The McCormack Ranch Trust dated January 6, 2005, Defendants-Appellees, and DOE ENTITIES 1-10, Defendants

         APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT (CIVIL NO. 12-1-1019-04)

          Matt A. Tsukazaki (Li & Tsukazaki) for Plaintiff-Appellant.

          John D. Zalewski Michael G Kozak (Case Lombardi & Pettit of counsel) Certified Management, Inc.

          James H.Q. Lee (Devens J. Nakano, Saito, Lee, Wong & Ching) Chaney Brooks & Company, LLC.

          Yuriko J. Sugimura Jason W. Hirata (Bendet Fidell Sugimura) for Defendants-Appellees Michael David Bruser; Tokyo Joe's Inc.; Michael T. McCormack, individually and as Trustee under that certain unrecorded Michael T. McCormack Revocable Living Trust Agreement dated November 12, 1991; and Michael T. McCormack and Signa S. McCormack, as Co-Trustees of The McCormack Ranch Trust dated January 6, 2005.

          FOLEY, PRESIDING J., FUJISE AND LEONARD, JJ.

          OPINION

          FOLEY, J.

         Plaintiff-Appellant Association of Apartment Owners of Royal Aloha (AOAO) appeals from the following entered in the Circuit Court of the First Circuit[1] (circuit court):

          (1) "Conclusions of Law, and Order Granting Defendant Certified Management, Inc's Motion for Summary Judgment, Filed 8/5/14, and Order Granting Joinder by: Defendant Chaney Brooks & Company, LLC to Defendant Certified Management Inc's Motion for Summary Judgment, Filed 8/12/14" entered on October 9, 2014;

         (2) "Amended Conclusions of Law, and Order Granting Defendant Certified Management, Inc's Motion for Summary Judgment, Filed 8/5/14, and Order Granting Joinder by: Defendant Chaney Brooks & Company, LLC to Defendant Certified Management Inc's Motion for Summary Judgment, Filed 8/12/14" entered on October 10, 2014;

         (3) "Conclusions of Law, and Order Granting Defendants Michael David Bruser, and Tokyo Joe's Inc's Motion for Partial Summary Judgment, Filed 6/19/14" entered on October 9, 2014;

         (4) "Order Granting Defendant Certified Management, Inc's Motion for Award of Attorneys' Fees and Costs Against Plaintiff AOAO Royal Aloha, Filed 10/24/14" entered on March 31, 2015;

         (5) "Order Granting Defendant Chaney Brooks & Company, LLC's Non Hearing Motion for Award of Attorneys' Fees and Costs, Filed 10/24/14" entered on March 31, 2015;

         (6) "Order Granting Defendants Michael T. McCormack, Individually and as Trustee and Co-Trustee, and Signa S. McCormack, as Co-Trustee's Motion for Award of Attorneys' Fees and Costs, Filed 10/24/14" entered on March 31, 2015;

         (7) "Order Granting Defendants Michael David Bruser and Tokyo Joe's, Inc's Motion for Award of Attorneys' Fees and Costs, Filed 10/23/14" entered on March 31, 2015; and

         (8) "Final Judgment in Favor of All Defendants Against Plaintiff Association of Apartment of [sic] Owners of Royal Aloha" entered on May 5, 2015.

         On appeal, the AOAO contends (1) the circuit court erred in applying the doctrine of laches to grant summary judgment in favor of the defendants; (2) the circuit court erroneously concluded that Hawaii Revised Statutes (HRS) § 514A-15.5 (2015 Supp.)[2] required the AOAO to send a bill to the commercial apartment owners as a condition precedent to the application of the commercial owners' contractual indemnification obligation; and (3) the circuit court abused its discretion in awarding attorneys' fees.[3]

         I. BACKGROUND

         The circuit court's factual background is undisputed on appeal:

The Royal Aloha Condominium is a mixed-use condominium project of residential and commercial units. The [AOAO] employed [Chaney Brooks & Company, LLC (Chaney)] from 1995 to 2002 and [Certified Management, Inc. (Certified Management)] from 2003 to 2010 as its Managing Agent.
Defendants[-Appellees] Michael David Bruser [(Bruser)] and Tokyo Joe's Inc [(Tokyo Joe's)] were the owners of commercial unit "C-1" in the Royal Aloha Condominium, during the relevant period.
Defendants[-Appellees] Michael T. McCormack [(McCormack)], individually and as Trustee under that certain unrecorded Michael T. McCormack Revocable Living Trust Agreement dated November 12, 1991 [(McCormack Trust)], Michael T. McCormack and Signa S. McCormack, as Co-trustees of The McCormack Ranch Trust dated January 6, 2005 [(McCormack Ranch Trust) (collectively, McCormacks)] were the owners of commercial unit "C-2" in the Royal Aloha Condominium, during the relevant period.
The [AOAO] controlled the electricity submeters for each unit. The electrical submetering system was installed 16 years ago, in 1998. The [AOAO] used Energy Data Corporation (1998 to 2002) and Bartley Engineering, Inc. (from June 2002) to read each unit's electricity submeter. The electrical engineers, from Energy Data or Bartley Engineering, read each unit's submeter to prepare a "Utility Billing Register" (UBR). The UBRs were sent to the Managing Agent [Chaney], then to [Certified Management] when it took over.
One of the Managing Agent's duties was to determine each unit owner's electricity and other pro-rated utility costs, based on the UBR, and bill each unit owner.
During the time period relevant to this lawsuit, from January 1998 to April 2010, the [AOAO, Chaney, and Certified Management] never charged or billed the owners of C-1, and erroneously billed the owners of C-2, for the submetered electricity costs shown in the UBRs. The [AOAO] claims that this was error, and that its managing agents [Chaney and Certified Management] were responsible for this alleged error.
As a result of this error, the [AOAO] brought this lawsuit, alleging that [Bruser, Tokyo Joe's, and the McCormacks], the owners of C-1 and C-2 during the pertinent time frame, owe hundreds of thousands of dollars in electricity costs that were unbilled and misbilled. The [AOAO] also brought claims against its former managing agent, [Chaney and Certified Management], which include breach of contract, breach of fiduciary duty, and negligence, for the alleged incorrect billing.
The period of alleged incorrect electricity billing spans 12 years, from January 1998 to April 2010. The [AOAO's] President "discovered" the alleged incorrect billing in April 2011, and this lawsuit was filed in April 2012.

         The AOAO filed its complaint against Certified Management, Chaney, Bruser, Tokyo Joe's, and the McCormacks (collectively, Appellees) on April 13, 2012, and an amended complaint on April 16, 2012 (First Amended Complaint).

         Bruser and Tokyo Joe's filed a motion for partial summary judgment on May 15, 2013 (May 2013 Motion for Partial Summary Judgment). Bruser and Tokyo Joe's argued that they had no contractual obligation to indemnify the AOAO under Section 6.02 of the AOAO's Bylaws. Bruser and Tokyo Joe's argued in the alternative that the AOAO's claims and damages should be limited to the applicable statute of limitations period. Additionally, Bruser and Tokyo Joe's argued that the AOAO's claims for equitable relief were barred by the doctrines of waiver, laches, and unclean hands. Chaney filed a motion to join the May 2013 Motion for Partial Summary Judgment on May 24, 2013. Certified Management filed a motion to join the May 2013 Motion for Partial Summary Judgment on June 25, 2013.

         On July 9, 2013, the circuit court held a hearing on Bruser and Tokyo Joe's May 2013 Motion for Partial Summary Judgment, Chaney's motion to join the May 2013 Motion for Partial Summay Judgment, and Certified Management's motion to join the May 2013 Motion for Partial Summary Judgment. At the hearing, the circuit court requested the parties submit supplemental briefs on the application of the statute of limitations.

         On July 18, 2013, Chaney submitted a supplemental brief on the issue of statute of limitations, arguing that the AOAO's claims were barred under HRS § 657-1 (1993).[4] On August 1, 2013, Bruser and Tokyo Joe's submitted a supplemental memorandum in support of their May 2013 Motion for Partial Summary Judgment arguing that the statute of limitations barred or limited the AOAO's damages.

         On September 9, 2013, the circuit court entered an order denying Bruser and Tokyo Joe's Motion for Partial Summary Judgment and Certified Management and Chaney's motions to join.

         On June 19, 2014, the McCormacks filed a motion for partial summary judgment or in the alternative to stay litigation (McCormack Motion for Partial Summary Judgment). On the same day, Bruser and Tokyo Joe's filed a motion for partial summary judgment (June 2014 Motion for Partial Summary Judgment). On June 24, 2014, Chaney filed a motion to join the McCormack Motion for Partial Summary Judgment and Bruser and Tokyo Joe's June 2014 Motion for Partial Summary Judgment.

         On August 5, 2014, Certified Management filed a motion for summary judgment (Certified Management MSJ). Certified Management argued that the AOAO's claims were statutorily time-barred and barred by laches.

         On August 7, 2014, Certified Management filed a motion to join Bruser and Tokyo Joe's June 2014 Motion for Partial Summary Judgment.

         On August 12, 2014, Chaney filed a motion to join the Certified Management MSJ.

         On August 20, 2014, the circuit court held a hearing on the McCormack Motion for Partial Summary Judgment and denied the motion.

         On September 5, 2014, Chaney filed a motion for summary judgment on the issue of successor liability.

         On September 9, 2014, the circuit court held a hearing on Bruser and Tokyo Joe's June 2014 Motion for Partial Summary Judgment and took the issues under advisement in anticipation of the hearing on the Certified Management MSJ.

         On September 15, 2014, the AOAO filed for partial summary judgment against Bruser, ...


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