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Bruser v. Bank of Hawaii

United States District Court, D. Hawaii

January 31, 2019

MICHAEL DAVID BRUSER, TRUSTEES UNDER THAT CERTAIN UNRECORDED REVOCABLE LIVING TRUST AGREEMENT DATED JULY 11, 1988, AS AMENDED, DOING BUSINESS AS DISCOVERY BAY CENTER; 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.

          ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFFS' MOTION FOR RECONSIDERATION

          LESLIE E. KOBAYASHI UNITED STATES DISTRICT JUDGE.

         On November 23, 2018, this Court issued the 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 (“11/23/18 Order”). [Dkt. no. 233.[1] On November 30, 2018, Plaintiffs/Counterclaim Defendants Michael David Bruser and Lynn Bruser (“the Brusers”) filed a motion for reconsideration of the 11/23/18 Order (“Motion for Reconsideration”). [Dkt. no. 234.] On December 14, 2018, Intervenor Defendant/Counterclaim Plaintiff Association of Apartment Owners of Discovery Bay (“AOAO”) filed its statement of no position, and Defendant/Counterclaim Plaintiff Bank of Hawaii, as Trustee (“BOH”), filed its memorandum in opposition. [Dkt. nos. 237, 238.] The same day, Defendants/Counterclaim Plaintiffs Susan Sheetz and Patricia Sheetz Bow (collectively “Sheetz Bow”), and Defendants/Counterclaim Plaintiffs Julie G. Henderson, Trustee of the Julie G. Henderson Irrevocable Trust; Julie G. Henderson, Trustee of the Jean K. Gowans Irrevocable Trust; Julie G. Henderson, Trustee of the Louis L. Gowans, Jr., Irrevocable Trust; and Richard L. Gowans, Trustee of the Richard L. Gowans Irrevocable Trust (collectively “Henderson/Gowans”), filed their respective joinders of simple agreement in the memorandum in opposition. [Dkt. nos. 239, 240.] The Court has considered the Motion for Reconsideration as a non-hearing matter pursuant to Rule LR7.2(e) of the Local Rules of Practice for the United States District Court for the District of Hawaii (“Local Rules”). The Brusers' Motion for Reconsideration is hereby granted in part and denied in part for the reasons set forth below.

         BACKGROUND

         The relevant factual and procedural background of this case is set forth in the 11/23/18 Order. Only the facts relevant to the Motion for Reconsideration will be repeated herein. The Brusers initiated this action by filing their Complaint for Declaratory Judgment on August 29, 2014, to dispute their liability for payment of certain trustee's fees (“Trustee Fee” or “Fee”) pursuant to the Trust Agreement dated June 6, 1974 (“Trust Agreement”). [Dkt. no. 1.] BOH filed its counterclaim against the Brusers on January 28, 2015 alleging, inter alia, a claim for declaratory judgment that, pursuant to the Condominium Conveyance Document, dated December 1, 1976 (“CCD”), the Brusers were obligated to pay the Trustee Fee.[2][Dkt. no. 34.]

         The parties proceeded to a bench trial on February 2, 2016, and this Court's Findings of Fact and Conclusions of Law and Order followed on June 28, 2016 (“6/28/16 FOF/COL”). [Dkt. no. 192.[3] Pursuant to the 6/28/16 FOF/COL, the Clerk's Office entered judgment on June 28, 2016, as follows: (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's claim for declaratory relief 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”); and (4) awarding attorneys' fees and costs to BOH. See dkt. no. 193 (“Judgment”); see also 6/28/16 FOF/COL, 2016 WL 3580612, at *7-8. On July 28, 2016, the Brusers filed a Notice of Appeal of the 6/28/16 FOF/COL and Judgment (“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 (“ICA Opinion”), affirming, inter alia, the decision by the Circuit Court of the First Circuit, State of Hawai'i (“Probate Court”) to increase the Trustee Fee under the Trust Agreement to $9, 850 in favor of BOH for a five-year period beginning October 2014 (“Trust Litigation”).[4] See ICA Opinion, 2018 WL 3199232, at *14.

         On July 31, 2018, BOH filed a Motion for Appointment of a Temporary Receiver (“Receiver Motion”). [Dkt. no. 221.] BOH argued the Brusers had not paid BOH their award of $137, 434.50 pursuant to the Judgment, and failed to pay the full monthly fee of $9, 850 plus GET, which had been determined reasonable in the underlying Trust Litigation. See 11/23/18 Order, 2018 WL 6161978 at *5. The Receiver Motion sought appointment of Steve K. Sombrero of Cushman & Wakefield ChaneyBrooks as the temporary receiver of the commercial unit at the Discovery Bay Condominium, located at 1778 Ala Moana Boulevard, Honolulu, Hawai'i 96815 (“Commercial Unit”), to: 1) collect and hold proceeds from the Commercial Unit pending the resolution of the Ninth Circuit Appeal and any further appellate review of the ICA Opinion; 2) apply the proceeds first to the Commercial Unit's maintenance and operation expenses, the uncontested Trustee Fee, and the maintenance fees and assessments of the AOAO allocable to the Commercial Unit (excluding the temporary receiver's fees), and second, to any current real property taxes; 3) deposit any remaining proceeds in an interest bearing account to hold until BOH is paid in full under the terms of the Judgment; and 4) be paid for his monthly service fees and costs in an amount the Court deems reasonable. [Receiver Motion at 1-3.] On August 28, 2018, the Brusers filed a memorandum in opposition to the Receiver Motion. [Dkt. no. 228.] The Brusers argued, inter alia, the appointment of a temporary receiver was premature since the Brusers planned to appeal the ICA Opinion and, “should the Hawaii Supreme Court grant review, the odds of a reversal are very high historically in every such grant of review.” [Id. at 8.]

         After weighing the factors in Canada Life Assurance Co. v. LaPeter, 563 F.3d 837, 844 (9th Cir. 2009), this Court granted the Receiver Motion. In doing so, this Court considered the Brusers' argument with regard to the pending Ninth Circuit Appeal and the appeal of the ICA Opinion, as well as the Brusers' failure to satisfy and comply with the Judgment entered on July 28, 2016. See 11/23/18 Order, 2018 WL 6161978, at *3, *5.

         In the Motion for Reconsideration, the Brusers submit that, on November 29, 2018, the Hawai'i Supreme Court accepted the Brusers' application for certiorari. [Motion for Reconsideration, Decl. of Gary Victor Dubin (“Dubin Decl.”), at ¶ 5, Exh. A (Order Accepting Application For Writ of Certiorari, filed 11/29/18 in the Hawai'i Supreme Court).] Because the 11/23/18 Order was based in large part upon the ICA Opinion, which is now pending appeal, the Brusers argue the 11/23/18 Order is premature, and urge this Court to reconsider and withdraw its ruling appointing the temporary receiver, or to stay the temporary appointment of a receiver.

         STANDARD

         This Court has previously stated that a motion for reconsideration

“must accomplish two goals. First, a motion for reconsideration must demonstrate reasons why the court should reconsider its prior decision. Second, a motion for reconsideration must set forth facts or law of a strongly convincing nature to induce the court to reverse its prior decision.” See Davis v. Abercrombie, Civil No. 11-00144 LEK-BMK, 2014 WL 2468348, at *2 (D. Hawaii June 2, 2014) (citation and internal quotation marks omitted). This district court recognizes three circumstances where it is proper to grant reconsideration of an order: “(1) when there has been an intervening change of controlling law; (2) new evidence has come to light; or (3) when necessary to correct a clear error or prevent manifest injustice.” Tierney v. Alo, Civ. No. 12-00059 SOM/KSC, 2013 WL 1858585, at *1 (D. Hawaii May 1, 2013) (citing School District No. 1J v. ACandS, Inc., 5 F.3d 1255, 1262 (9th Cir. 1993)). . . .

Riley v. Nat'l Ass'n of Marine Surveyors, Inc., Civil No. 14-00135 LEK-RLP, 2014 WL 4794003, at *1 (D. Hawai'i Sept. 25, 2014).

         The Brusers appear to argue there is new evidence, and state the Motion for Reconsideration is brought pursuant to Local Rule 60.1. However, Local Rule 60.1 is applicable to reconsideration of interlocutory orders, while case-dispositive orders are governed by Fed.R.Civ.P. 59 or 60. See Local Rule LR60.1. Since Judgment has been entered in this case and the Brusers seek reconsideration of this Court's 11/23/18 Order, the Court applies Fed.R.Civ.P. 60. Cf. United States v. Liddell, Civil No. 07-00310 SOM/KSC, 2007 WL 4841274, at *1 (D. Hawai'i Aug. 28, 2007) (“Although Local Rule 60.1(a) normally applies only to interlocutory orders, because judgment has not yet been entered in this ...


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