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Atooi Aloha, LLC v. Gaurino

United States District Court, D. Hawaii

November 21, 2018

ATOOI ALOHA, LLC, ET AL., Plaintiffs,


          Richard L. Puglisi United States Magistrate Judge

         Before the Court is Defendant/Third-Party Plaintiff APT-320 LLC's Motion for Attorney's Fees and Costs, filed on October 10, 2018 (“Motion”). See ECF No. 340. In the Motion, APT-320 LLC requests an award of attorney's fees and costs against Defendant Abigail Gaurino. Id. Defendant Cristeta C.

         Owan filed a Statement of No. Opposition on October 12, 2018. ECF No. 342. Plaintiffs filed a Statement indicating that they did not oppose the requested fees and costs as against Defendant Abigail Gaurino only, and not against Plaintiffs, on October 15, 2018. ECF No. 345. Defendants Abner Gaurino, Abigail Gaurino, and Aurora Gaurino filed a Statement of No. Opposition to the Motion on October 16, 2018. ECF No. 348. Third-Party Defendant Association of Apartment Owners of Diamond Head Sands' filed a Statement of No. Position to the Motion on November 19, 2018. ECF No. 356. No. other parties filed a response to the Motion and the time for filing such a response has expired. This matter is suitable for disposition without a hearing pursuant to Local Rule 7.2(d). After careful consideration of the Motion and the relevant authority, the Court FINDS AND RECOMMENDS that APT-320 LLC's Motion be GRANTED.


         For purposes of this Motion, the Court only recites those background facts related to APT-320 LLC's claims against Defendant Abigail Gaurino. On February 13, 2014, Plaintiff Atooi Aloha, LLC entered into an agreement to purchase shares in exchange for the conveyance of certain real property located at 3721 Kanaina Street, Honolulu, Hawaii TMK (1)-3-1-025-008 CPR0088 (“the Property”) to Defendant Abigail Gaurino. Following the conveyance of the Property, Defendant Abigail Gaurino obtained a $200, 000 Note and Mortgage on the Property from Investors Funding Corporation, which were then assigned to APT-320 LLC.

         In this action, summary judgment was granted in favor of APT-320 LLC on its claim of foreclosure. See ECF No. 238, 262. The Property was then sold, the sale was confirmed by the district court, and a judgment for possession was entered. See ECF Nos. 350, 351.

         In the present Motion, APT-320 LLC requests attorney's fees and costs against Defendant Abigail Gaurino related to its foreclosure claim in this action and also for attorney's fees and costs that it incurred in pursuing a foreclosure action in Hawaii state court. See ECF No. 340-1.


         In diversity cases, the Court must apply state law in determining whether the prevailing party is entitled to attorneys' fees. Kona Enters., Inc. v. Estate of Bishop, 229 F.3d 877, 883 (9th Cir. 2000). Under Hawaii law, “[o]rdinarily, attorneys' fees cannot be awarded as damages or costs unless so provided by statute, stipulation, or agreement.” Stanford Carr Dev. Corp. v. Unity House, Inc., 141 P.3d 459, 478 (Haw. 2006) (citing Weinberg v. Mauch, 890 P.2d 277, 290 (Haw. 1995)).

         Here, APT-320 LLC seeks an award of fees under Hawaii Revised Statutes Section 607-14. Section 607-14 provides that attorneys' fees shall be awarded “in all actions in the nature of assumpsit and in all actions on a promissory note or other contract in writing that provides for an attorney's fee.” Haw. Rev. Stat. § 607-14. Section 607-14 also provides that such fees shall “not exceed twenty-five per cent of the judgment.” Haw. Rev. Stat. § 607-14. To award attorneys' fees under Section 607-14, the court must determine whether: (A) the action is in the nature of assumpsit; (B) APT-320 LLC is the prevailing party; (C) the fees requested are reasonable; and (D) the fees do not exceed twenty-five percent of the judgment.

         A. Action in the Nature of Assumpsit or Action on a Promissory Note or Other Contract in Writing That Provides for an Attorney's Fee

         APT-320 LLC states, without any discussion, that its crossclaim against Defendant Abigail Gaurino for foreclosure is in the nature of assumpsit. ECF No. 340-1 at 6. Based on the Court's review of the applicable Hawaii case law, actions for foreclosure have routinely been held to be statutory, rather than contractual, in nature, and therefore, not in the nature of assumpsit. See, e.g., James B. Nutter & Co. v. Domingo, 388 P.3d 47 (Haw. Ct. App. 2016) (“Because the basis for [plaintiff's] requested relief of the right to foreclose was statutory rather than contractual, the portion of [plaintiff's] action dealing with its right to foreclose on the property does not fall within HRS § 607-14.”); see also Order Re: Motions for Summary Judgment and Motion for Interlocutory Decree of Foreclosure, ECF No. 238 (citing Hawaii Revised Statutes § 667-1.5, the statutory provision providing for foreclosure by judicial action, in granting APT-320 LLC's motion for summary judgment).

         However, in this action, APT-320 LLC's crossclaim for foreclosure did not solely rely on its statutory right to foreclose, but also alleged that Defendant Abigail Gaurino defaulted on the Note and Mortgage. See ECF No. 40-1. Both the Note and Mortgage contain provisions providing for an award of attorney's fees to the prevailing party. ECF No. 340-3 at 2 (providing that the borrower defaults on the Note, “the Note holder will have the right to be paid back for all its reasonable costs and expenses. Those expenses include, for example, reasonable attorney's fees and collection agency fees.”); ECF No. 340-4 at 4 (providing that the mortgager “will pay all expenses, including reasonable attorneys' fees, incurred by the Mortgagee, whether in litigation or otherwise, to sustain the lien or priority of this Mortgage, or to protect or enforce any of the Mortgagee's rights hereunder”). Accordingly, the Court finds that APT-320 LLC's claim for foreclosure against Defendant Abigail Gaurino was an action on a contract in writing that provides for an attorney's fee and APT-320 LLC is eligible for an award of attorney's fees under that provision of Section 607-14.

         B. ...

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