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In re Marn Family Litigation

Supreme Court of Hawaii

December 21, 2016

IN RE: MARN FAMILY LITIGATION

         CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS (CAAP-10-0000181; MASTER FILE NO. 00-1-MFL)

          Alexander Y. Marn, individually, and Alexander Y. Marn, and Ernestine L. Marn, as Co-trustees of the Revocable Living Trust Agreement of Alexander Y. Marn, petitionerspro se

          Steven Guttman and Dawn Egusa for James. K. M. Dunn, as Successor Trustee of the Annabelle Y. Dunn Trust,

          Mark B. Desmarais for James Y. Marn, Jr.

          Louise K.Y. Ing and Zachary M. DiIonno for Liquidating Receiver S. Steven Sofos

          RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.

          OPINION

          NAKAYAMA, J.

         I. INTRODUCTION

         This appeal is the most recent development in the Marn family litigation, which has been ongoing for almost twenty years and concerns the ownership and control of the Marn family business. In brief, in 1998 Petitioner-Appellant Alexander Y. Marn (Alexander) sought a declaratory judgment and specific performance regarding his rights to the family business. Despite a jury demand, a bench trial was held and the Circuit Court of the First Circuit (circuit court) held in favor of Respondent-Appellee James K.M. Dunn (Dunn). The Intermediate Court of Appeals (ICA) affirmed the circuit court's judgment on all counts.

         At issue for our review is whether Alexander was denied his right to a jury trial when the circuit court decided the underlying dispute by bench trial.

         Because Alexander was constitutionally entitled to a trial by jury on his action for declaratory judgment, and because the record indicates that a jury trial was properly demanded and preserved, we hold that the ICA gravely erred in affirming the circuit court's decision to conduct a bench trial in this case. As such, the ICA's March 23, 2016 judgment on appeal, which affirmed the circuit court's October 25, 2010 partial final judgment, is vacated and remanded on the ground that Alexander was entitled to a jury trial.

         II. BACKGROUND

         This case arises from a partnership dispute between four siblings over the operation of a family business, McCully Associates, and the siblings' respective interests in the business.

         The Marn parents built a successful family business through Ala Wai Investment, Inc., a Hawai'i corporation, and McCully Associates (MA), a Hawai'i limited partnership. Ala Wai Investment was the corporate general partner of MA, and MA developed and managed various Marn properties, including the McCully Shopping Center.

         Four of the Marn children (James, Alexander, Annabelle, and Eric) served as limited partners and owned equal shares of MA. Annabelle died in 1996 and her interest in MA was left to her husband, James Dunn, as the trustee of the Annabelle Y. Dunn Trust (AYD Trust). The underlying dispute in this case arose between some of the Marn siblings and Dunn over Annabelle's interest in MA.

         A. Circuit Court Proceedings

         Over the last seventeen years, various suits were brought by members of the Marn family over the ownership and control of MA and its properties. These suits were consolidated for discovery and case management, but not for trial. Of the cases that were filed, only Civil No. 98-4706-10 (the Buyout case) and Civil No. 98-5371-12 (the Judicial Accounting case)[1]reached trial. On appeal for our review is a single issue regarding the Buyout case.

         On October 29, 1998, Alexander and Eric filed the original complaint for the Buyout case, [2] seeking both declaratory relief and specific performance regarding the partners' rights to buy-out Annabelle's interest in MA. Alexander and Eric asserted that two agreements, the McCully Associates Partnership Agreement (Partnership Agreement) and the Transfer Restriction Agreement (Transfer Agreement), both drafted in 1982 and signed by all siblings, were created "to ensure that the Marn Properties would stay in the Marn Family."

         According to Alexander and Eric, under the Partnership and Transfer Agreements, a partner was prohibited from disposing of his or her interest in MA without first offering to sell his or her interest to the other partners. Accordingly, Alexander and Eric asserted that when Annabelle died and her interest in MA passed to Dunn through the AYD Trust, Dunn was obligated to offer to sell this interest in accordance with the terms of the Partnership and Transfer Agreements.

         As such, under the heading "Claim for Declaratory Relief, " Alexander and Eric made the following request for relief:

25. Plaintiffs believe that the trustees of the Revocable Trust, the personal representatives of the Estate of Annabelle Dunn (Defendants James Dunn and Stephen Marn), and/or such persons who currently hold Annabelle's Partnership interests, are obligated to sell those interests in accordance with the terms of the Partnership Agreement and the Transfer Restriction Agreement[.]
26. In the alternative and if the sale of Annabelle's Partnership interest has not been triggered by the foregoing events, Plaintiffs believe that they were deceived or, at a minimum, reasonably operated under a mistake of fact, in their consent to the holding of Annabelle's interest in the partnership in the name of the Revocable Trust. Had they known that the Marn Properties would not be kept within the Marn family, they would not have consented to the purported assignment.
27. Plaintiffs have deposited into escrow 1) earnest money and 2) documents ready for execution, to effect and facilitate the transfer of Annabelle's Partnership interest as required by the foregoing agreements. The escrow was ready to close on or before September 28, 1998. Plaintiffs made demand upon James Dunn and Stephen Marn to sell Annabelle's Partnership interest in accordance with the foregoing agreements, but they refused to do so.
28. As a result, a genuine dispute has arisen between the parties, which is ripe for decision. A decision at this time will materially aid the parties in their own planning and in the operation of the Partnership.

         Additionally, under the heading "Claim for Specific Performance, " Alexander and Eric made the following request for relief:

If the Court agrees that Defendants are obligated to sell Annabelle's interest in the Partnership to the remaining limited partners, then Plaintiffs request that the Court enforce the terms of the purchase and sale provisions, as the Plaintiffs are ready, willing and able to perform and they have no adequate remedy at law, because the underlying asset of the Partnership is real property, the loss of which cannot be adequately compensated by damages. Plaintiffs pray judgment as follows:
1. That process issue out of and under the seal of this court, citing and summoning the defendants to appear and respond as required by law; and
2. That the court determine that those Defendants who hold the Partnership interest originally held in the name of Annabelle Y. Dunn are obligated to sell the same to the remaining limited partners; or, in the alternative,
3. That the Consent to Assignment of Annabelle's Partnership interest to her Revocable Trust was ineffective to waive Plaintiffs' rights to purchase Annabelle's interest;
4. That this Court order the sale of the Annabelle Y. Dunn partnership interests in McCully Associates to the other limited partners of the Partnership at a price consistent with sections 1, 2, 3 and 4 of the McCully Associates Partnership Agreement and the Transfer Restriction Agreement annexed as Exhibit "B" thereto.
5. For their cost of court, reasonable attorneys [sic] fees and such other relief as is just.

         On December 4, 1998, the AYD Trust filed an answer to the complaint, admitting that it had refused to sell Annabelle's partnership interest and denying that "any transfer of partnership interest is 'required.'" The AYD Trust also included in its answer a demand for jury trial. On December 11, 1998, the AYD Trust filed a first amended answer to the complaint, which also included a jury demand.

         In the October 15, 1999[3] and February 1, 2002[4] orders setting trial for the Buyout case, it was noted that the case was set for a jury trial.

         In June of 2005, the court's appointed receiver for MA (the Receiver) filed a motion for summary judgment or, in the alternative, a motion to strike jury demands in the Buyout and Judicial Accounting cases. Eric filed a memorandum in opposition to the motion to strike jury demand, which Alexander joined. In its order granting in part the Receiver's motion for summary judgment, the court[5] concluded that it was unnecessary to decide the jury issue at that point.

         During a pretrial hearing on August 24, 2005, the trial by jury issue was discussed for the Buyout case. Wayne Sakai, counsel for Eric and Linda Marn, argued that there should be a jury trial for the Buyout case because there were factual and legal issues that needed to be resolved. Steven Guttman, counsel for Dunn, [6] argued that a jury trial had not been demanded for the Buyout case and that there was no right to demand a jury trial at this time. The circuit court agreed with Guttman.

[MR. SAKAI]: Your Honor, if I may address and add to what Mr. Guttman and Mr. Freed said is we believe that another --the third issue would be ripe for the Court's adjudication without being enmeshed in the I.R.S. criminal investigation would be the buy-out. . . . It just goes to the ability of Eric and Alexander Marn's ability to buy-out the Dunn, Annabelle Dunn's share.
And our position is that's a valid agreement, and that should be heard by the Court. And if the Court hears that, there's another catch to it is, I believe, that there's factual determinations to be made in addition to legal issues, than [sic] a jury trial should be warranted on that aspect of it. Because it does not involve at all the I.R.S. It does involve factual and legal issues, and I think we need -- not I think, I -- I believe we need a jury to determine the factual issues, and the Court to determine the legal issues.
But the buy-out is very isolated, and it's very clean, your Honor, very clean. And I think that requires a very short jury trial that, basically, there's not too much for the jury to determine. I think the factual issues are there. If they want to do a stipulated facts, we can do that, but I -- I don't think they want to do that. So we need a jury to determine the facts of the case, but I think that's a -- a document that cries out to be adjudicated separate and apart from the I.R.S. issue.
The buy-out is very important, and it could have significant impact upon the current mediation right now. I'm only ...

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