United States District Court, D. Hawaii
ORDER RE: MOTIONS FOR SUMMARY JUDGMENT AND MOTION FOR
INTERLOCUTORY DECREE OF FORECLOSURE
Michael Seabright, Chief United States
Atooi Aloha, LLC (“Atooi Aloha”), Craig Stanley
(“Stanley”) (individually and as trustee for the
Edmon Keller and Cleavette Mae Stanley Family Trust (the
“Trust”)), and Millicent Andrade
“Plaintiffs”) claim they were fraudulently
induced to invest approximately $500, 000 in cash and real
property in a Ponzi or pyramid scheme run through
“Bidders Paradise, ” a penny auction site
affiliated with a Hong Kong corporation known as Better
Living Global Marketing (“BLGM”).
the court are three motions: (1) Defendants Fidelity National
Title & Escrow of Hawaii, Inc. and Rommel Guzman's
(collectively, “Fidelity”) Motion for Summary
Judgment, ECF No. 166, and Defendants Abner and Aurora
Gaurino (collectively the
“Gaurinos”) and their daughter Abigail
Gaurino's Motion for Joinder therein, ECF No. 191; (2)
Defendant Cristeta C. Owan's (“Owan”) Motion
for Summary Judgment, ECF No. 202; and (3) Defendant APT-320,
LLC's (“APT-320”) Motion for Summary Judgment
and for Interlocutory Decree of Foreclosure, ECF No. 164. For
the following reasons, Fidelity's Motion and
APT-320's Motion are GRANTED, but the Motion for Joinder
is DENIED, and Owan's Motion is DENIED.
to the First Amended Complaint (“FAC”), Owan and
the Gaurinos gave a presentation at Owan's office urging
attendants, including Andrade, to purchase
“shares” or “units” of BLGM,
promising that investors would triple their investment within
three to six months. FAC ¶ 28-29, ECF No. 30. Owan
called the “opportunity” a “safe” and
“great investment, ” and “the real
deal” that “really works.” Id. at
¶¶ 30, 32. The Gaurinos assured Andrade that they
would buy any units she purchased if she were not
“satisfied with the business opportunity.”
Id. ¶ 31.
October 2, 2013 and November 15, 2013, Plaintiffs paid the
Gaurinos over $61, 000 for BLGM stock using electronic funds
transfers or checks variously made out to “Cash,
” “Bliss 4 Life, ” (the Gaurinos' BLGM
account), and an individual named So Chau Pui. Id.
¶¶ 33-36. Then on February 13, 2014, Atooi Aloha
entered into an escrow agreement to purchase 333 shares of
BLGM by transferring title to a condominium (the
“Diamond Head Sands Property” or the
“Property”) to Abigail. Id. ¶ 37.
According to Plaintiffs, the Gaurinos told Plaintiffs that
they would return Plaintiffs' cash and real property, if
asked. Id. ¶ 43. “For escrow purposes,
” however, the Gaurinos told Plaintiffs “that
they must state on the Seller's Settlement Statement that
[Abigail] paid them $300, 000 for the Diamond Head Sands
Property.” Id. ¶ 38. Fidelity served as
the escrow company for the transaction.
the transfer, Abigail obtained a $220, 000 loan from
Investors Funding Corporation (“IFC”). She signed
an interest-only Note in favor of IFC for that amount, which
is secured by a Mortgage on the Property. ECF Nos. 165-3 to
-4. IFC then assigned the Mortgage to APT-320. ECF No. 165-5.
Abigail has failed to repay the amounts owed. Joseph Gedan
Decl. ¶ 9, ECF No. 165-1.
allege that they never received certificates for shares that
they purchased. FAC ¶ 72. They further allege that such
stock is “worthless” and that they have not
received any of the promised returns, either on their
investment or of their cash and property. Id.
¶¶ 40, 41-46.
recites eight causes of action: Counts One through Three
assert violations of the Securities Exchange Act, including
the unregistered and fraudulent sale of securities; Counts
Four through Six allege state-law fraud claims under both
Hawaii statute and the common law; Count Seven seeks an
imposition of a constructive trust on the Diamond Head Sands
Property; and Count Eight seeks to quiet title to the
Property in the name of Craig B. Stanley, “as Trustee .
. . or otherwise as [he] may so direct.” FAC at 14-25.
APT-320 filed a Crossclaim against Fidelity, Owan, Abigail
and the Gaurinos and a Counterclaim against Plaintiffs
asserting its right to foreclose on the Property. ECF No. 40.
It filed a First Amended Crossclaim and Counterclaim on June
6, 2017. ECF No. 57. And it a filed Third-Party Complaint
against the Association of Apartment Owners of Diamond Head
Sands (“the Association”) on September 26, 2017,
based on a Notice of Lien the Association recorded for common
expenses owed to it, claiming that the Association's
interests in the Property, “if any, are junior or
subordinate to APT-320's Mortgage, Assignment of Rents
and Security Agreement.” ECF No. 145 ¶ 11.
filed a Crossclaim against Abigail, the Gaurinos, and Owan,
asserting that, should Plaintiffs recover against it,
“then one some or all of Cross-Claim Defendants are
liable to Fidelity.” ECF Nos. 46 and 46-1 ¶ 4.
and the Gaurinos filed a Counterclaim against Plaintiffs, ECF
No. 52, and a Crossclaim against Fidelity, asserting that
should Plaintiffs prevail against them, they are entitled to
indemnification and damages. ECF No. 53.
filed its Motion for Summary Judgment and for Interlocutory
Decree of Foreclosure on October 25, 2017. ECF No. 164. No