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Atooi Aloha, LLC v. Gaurino

United States District Court, D. Hawaii

January 31, 2018

ATOOI ALOHA, LLC, ET AL., Plaintiffs,
v.
ABNER GAURINO, ET AL., Defendants.

          ORDER RE: MOTIONS FOR SUMMARY JUDGMENT AND MOTION FOR INTERLOCUTORY DECREE OF FORECLOSURE

          J. Michael Seabright, Chief United States District Judge

         I. INTRODUCTION

         Plaintiffs 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 (“Andrade”) (collectively, “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”).

         Before 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”)[1] 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.

         II. BACKGROUND

         A. Factual Background

         According 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.

         Between 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.

         Following 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.

         Plaintiffs 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.

         B. Procedural Background

         The FAC 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.

         Defendant 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.

         Fidelity 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.

         Abigail 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.

         APT-320 filed its Motion for Summary Judgment and for Interlocutory Decree of Foreclosure on October 25, 2017. ECF No. 164. No ...


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