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Bruser v. Bank of Hawaii

United States District Court, D. Hawaii

November 21, 2018

MICHAEL DAVID BRUSER and LYNN BRUSER, Trustees under that certain unrecorded Revocable Living Trust Agreement dated July 11, 1988, as amended, doing business as Discovery Bay Center, Plaintiffs,
v.
BANK OF HAWAII, a Hawaii corporation, as Trustee, as successor by merger with Hawaiian Trust Company, Limited, a former Hawaii corporation and as successor Trustee under that certain Trust Agreement dated June 6, 1974, Defendant,
v.
JULIE G. HENDERSON, as Trustee of the Julie G. Henderson Irrevocable Trust, and as Trustee of the Jean K. Gowans Irrevocable Trust, and as Trustee of the Louis L. Gowans, Jr. Irrevocable Trust; RICHARD L. GOWANS, as Trustee of the Richard L. Gowans Irrevocable Trust; KEVIN I. YOKOHAMA; ASSOCIATION OF APARTMENT OWNERS OF DISCOVERY BAY; SUSAN SHEETZ; and PATRICIA SHEETZ BOW, Intervening Defendants. BANK OF HAWAII, a Hawaii corporation, as Trustee, as successor by merger with Hawaiian Trust Company, Limited, a former Hawaii corporation and as successor Trustee under that certain Trust Agreement dated June 6, 1974. Counterclaim Plaintiff,
v.
MICHAEL DAVID BRUSER and LYNN BRUSER, Trustees under that certain unrecorded Revocable Living Trust Agreement dated July 11, 1988, as amended, doing business as Discovery Bay Center, Counterclaim Defendants.

         ORDER (1) GRANTING DEFENDANT/COUNTERCLAIM PLAINTIFF BANK OF HAWAII'S MOTION FOR APPOINTMENT OF TEMPORARY RECEIVER AND (2) GRANTING IN PART AND DENYING IN PART INTERVENOR DEFENDANT/COUNTERCLAIM PLAINTIFF ASSOCIATION OF APARTMENT OWNERS OF DISCOVERY BAY'S SUBSTANTIVE JOINDER

          Leslie E. Kobayashi, United States District Judge

         On July 31, 2018, Defendant/Counterclaim Plaintiff Bank of Hawaii, as Trustee (“BOH”), filed its Motion for Appointment of a Temporary Receiver (“Motion”). [Dkt. no. 221.] Intervenor Defendant/Counterclaim Plaintiff Association of Apartment Owners of Discovery Bay (“AOAO”) filed a substantive joinder in the Motion on August 7, 2018 (“Joinder”). [Dkt. no. 223.] On August 28, 2018, BOH filed its supplemental memorandum in support of the Motion (“Supplemental Memorandum”), and Plaintiffs/Counterclaim Defendants Michael David Bruser and Lynn Bruser (“the Brusers”) filed their memorandum in opposition to the Motion. [Dkt. nos. 227, 228.] On September 4, 2018, AOAO filed a supplemental memorandum regarding the Motion and the Joinder, [1] and BOH filed its reply memorandum. [Dkt. nos. 229, 230.] The Court finds these matters suitable for disposition without a hearing pursuant to Rule LR7.2(d) of the Local Rules of Practice of the United States District Court for the District of Hawaii (“Local Rules”). BOH's Motion is hereby granted, and AOAO's Joinder is hereby granted in part and denied in part, for the reasons set forth below.

         BACKGROUND

         A detailed history of this case is set forth in this Court's June 28, 2016 Findings of Fact and Conclusions of Law and Order (“6/28/16 FOF/COL”). [Dkt. no. 192.[2] The Court will include only those facts relevant to the instant matter. This case arose out of a contract dispute regarding liability for payment of trustee's fees (“Trustee Fee” or “Fee”). On August 29, 2014, the Brusers filed their Complaint for Declaratory Judgment (“Complaint”) against BOH. [Dkt. no. 1.] BOH filed its counterclaims against the Brusers on January 28, 2015 (“BOH Counterclaim”). [Dkt. no. 34.]

         While the Brusers' Complaint was filed against a single defendant (that is, BOH), several parties sought permission to intervene as defendants and, upon being granted intervention, they filed their own respective counterclaims, including AOAO.[3]See Order Granting Proposed Intervenor Association of Apartment Owners of Discovery Bay's Motion to Intervene Filed December 30, 2014, filed 3/27/15 (dkt. no. 45).

         The Complaint sought declaratory judgment that the Brusers were, inter alia: not liable for the payment of the Trustee Fee under the Trust Agreement dated June 6, 1974 (“Trust Agreement”); or, in the alternative, only liable for the actual percentage of their undivided interest or only reasonable fees as determined at trial. [Complaint at ¶¶ 23(a)-(b).] They also sought additional relief such as an accounting, and reasonable attorneys' fees and costs. [Id. at ¶¶ E-F.]

         The BOH Counterclaim had five claims: (1) a claim for a declaratory judgment that, pursuant to the Condominium Conveyance Document, dated December 1, 1976 (“CCD”), the Brusers were obligated to pay the Trustee Fee as determined under the Trust Agreement; (2) breach of contract under the CCD; (3) breach of contract under the Trust Agreement; (4) breach of the covenant of good faith and fair dealing; and (5) recovery of attorneys' fees and costs incurred as a result of enforcing the CCD pursuant to the terms of the Trust Agreement.

         The AOAO Counterclaim contained four claims: (1) a claim for declaratory judgement that the Brusers were obligated to pay the Trustee Fee as determined under the Trust Agreement and/or the CCD; (2) breach of contract under the CCD; (3) breach of contract under the Trust Agreement; and (4) breach of the covenant of good faith and fair dealing.

         On April 16, 2015, BOH filed its motion for partial summary judgment as to its first counterclaim against the Brusers. [Dkt. no. 50.] This Court granted BOH's motion, stating “the plain language of the CCD requires payment of fees under the Trust Agreement, which includes the Trustee Fee.” Bruser v. Bank of Hawaii, Civil No. 14-00387 LEK-KSC, 2015 WL 4469850, at *4 (D. Hawai`i July 21, 2015). The Court declined to address the amount of the Trustee Fee, or any matters of interpretation of the Trust Agreement. Id. at *4 n.15.

         The Court held a bench trial on February 2, 2016 on the remaining claims.[4] [Minutes, filed 2/2/16 (dkt. no. 177).] The 6/28/16 FOF/COL followed and the Clerk's Office entered Judgment on June 28, 2016, finding (1) in favor of BOH on its second counterclaim for breach of contract under the CCD; (2) in favor of the Henderson/Gowans, AOAO, Yokoyama, and Sheetz Bow on their claims for declaratory relief and that the Brusers are liable for the total amount of the unpaid Trustee Fee; (3) awarding $137, 434.50 to BOH as the difference between what the Brusers owed and what they paid between October 2014 and December 2015, with general excise tax (“GET”); (4) awarding attorneys' fees and costs to BOH. 2016 WL 3580612, at *7-8. The Brusers filed an appeal on July 28, 2016, which is currently pending before the Ninth Circuit (“Ninth Circuit Appeal”). [Dkt. no. 200.]

         On June 29, 2018, the Hawai`i Intermediate Court of Appeals (“ICA”) issued a Memorandum Opinion in In the Matter of the Trust Agreement dated June 6, 1974, as amended, No. CAAP-15-0000409 (“Trust Litigation” and “ICA Opinion”).[5] See 2018 WL 3199232. The ICA reviewed, inter alia, the Probate Court's ruling to increase the Trustee Fee in favor of BOH to $9, 850 for a five-year period beginning October 2014. Id. at *10. The ICA affirmed the Probate Court's decision, stating the increase was “authorized and reasonable.” Id. at *14. The ICA remanded the matter to the Probate Court for further proceedings. Id. at *21.

         The Brusers represent they will timely file a petition for writ of certiorari to have the Hawai`i Supreme Court review the ICA Opinion (“Hawai`i Supreme Court Appeal”), [6] [Mem. in Opp. at 8, ] and that the Ninth Circuit Court of Appeals has heard oral argument on October 12, 2018 on the appeal of the 6/28/16 FOF/COL. [Id.]

         STANDARD

Under federal law, appointing a “receiver is an extraordinary equitable remedy, ” which should be applied with caution. Aviation Supply Corp. [v. R.S.B.I. Aerospace, Inc.], 999 F.2d [314, ] 316 [(8th Cir. 1993)]; 12 [Charles Alan] Wright, [Arthur R.] Miller & [Richard L.] Marcus [Federal Practice and Procedure] § 2983, at 24 [(2d ed. 1997)]. However, there is “no precise formula for determining when a receiver may be appointed.” Aviation Supply Corp., 999 F.2d at 316. Rather, federal courts consider a variety of factors in making this determination, including, for example: (1) “whether [the party] seeking the appointment has a valid claim”; (2) “whether there is fraudulent conduct or the probability of fraudulent conduct, ” by the defendant; (3) whether the property is in imminent danger of “being lost, concealed, injured, diminished in value, or squandered”; (4) whether legal remedies are inadequate; (5) whether the harm to plaintiff by denial of the appointment would outweigh injury to the party opposing appointment; (6) “the plaintiff's probable success in the action and the possibility of irreparable injury to plaintiff's interest in the property”; and, (7) “whether [the] plaintiff's interests ...

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