Bank of Hawaii v. Kunimoto, No. 20575.

• Court: Supreme Court of Hawai'i
• Writing for the Court: MOON, C.J., KLEIN, LEVINSON, NAKAYAMA, and RAMIL, JJ.
• Citation: 984 P.2d 1198,91 Haw. 372
• Decision Date: 30 August 1999
• Docket Number: No. 20575.
• Parties: BANK OF HAWAII, a Hawai`i banking corporation, Plaintiff-Appellee, v. Allan Ryo KUNIMOTO, aka Allan R. Kunimoto, Allan R. Kunimoto, as Trustee of that certain unrecorded Allan R. Kunimoto Revocable Trust Agreement dated February 19, 1981, as amended, Living Designs, Inc., a Hawai`i corporation, John Does 1-10, Doe Partnerships, Corporations or Other Entities 1-20, Defendants, and A. Barry Cappello and James L. Hudgens, Parties-in-Interest/Appellants.

984 P.2d 1198
91 Haw. 372

BANK OF HAWAII, a Hawai`i banking corporation, Plaintiff-Appellee,
v.
Allan Ryo KUNIMOTO, aka Allan R. Kunimoto, Allan R. Kunimoto, as Trustee of that certain unrecorded Allan R. Kunimoto Revocable Trust Agreement dated February 19, 1981, as amended, Living Designs, Inc., a Hawai`i corporation, John Does 1-10, Doe Partnerships, Corporations or Other Entities 1-20, Defendants, and A. Barry Cappello and James L. Hudgens, Parties-in-Interest/Appellants

No. 20575.

Supreme Court of Hawai`i.

August 30, 1999.

Reconsideration Denied October 9, 1999.

984 P.2d 1200

Kelvin H. Kaneshiro, Honolulu, (Dennis E.W. O'Connor with him on the briefs) of Reinwald, O'Connor & Playdon for Parties-In-Interest/Appellants

A. Barry Cappello and James L. Hudgens, Katherine G. Leonard, Honolulu (Nenad Krek with her on the brief) of Carlsmith Ball Wichman Case & Ichiki for Plaintiff-Appellee Bank of Hawaii.

MOON, C.J., KLEIN, LEVINSON, NAKAYAMA, and RAMIL, JJ.

Opinion of the Court by RAMIL, J.

Parties-in-interest/appellants A. Barry Cappello (Cappello) and James L. Hudgens (Hudgens) (collectively appellants), pro hac vice counsel for defendant Allan R. Kunimoto, M.D. (Dr. Kunimoto) in a mortgage foreclosure action filed by plaintiff-appellee Bank of Hawaii (BOH) on April 23, 1993, appeal from the first circuit court's order, filed on December 24, 1996, granting BOH's motion for an order to show cause why Dr. Kunimoto, Cappello, and Hudgens should not be held in contempt of court. In the December 24, 1996 order, the circuit court revoked the pro hac vice status of both Cappello and Hudgens, required appellants to disgorge funds resulting from the sale of certain Central Pacific Bank, Inc. (CPB) stock, and ordered appellants to reveal in any future pro hac vice application in Hawai`i that their status was revoked in the instant case and the reasons therefor.

Appellants contend that the trial court erred in: (1) revoking appellants' pro hac vice status and requiring future notice of said revocation, because (a) appellants were denied due process and (b) "there was no evidence to justify such a serious sanction"; and (2) ordering appellants to disgorge funds obtained from the sale of CPB stock, because the trial court was without jurisdiction to determine the ownership rights of Yoshio Kunimoto, the father of Dr. Kunimoto and a non-party to the underlying action.¹ Because

984 P.2d 1201

the circuit court did not abuse its discretion, we affirm

I. BACKGROUND

In order to review the basis for the circuit court's order, it is necessary to detail the complex and labored history of both the underlying case and the sanctions proceedings. The following factual background, therefore, is necessarily long.

A. The Mortgage Foreclosure Action

BOH filed a mortgage foreclosure complaint on April 23, 1993 against Dr. Kunimoto, individually and as Trustee, as well as Dr. Kunimoto's corporation, Living Designs, Inc. (collectively "Dr. Kunimoto"), when Dr. Kunimoto defaulted on two bank loans and related security interests. BOH sought (1) the total amount due and an order and interlocutory decree of foreclosure, (2) an order and interlocutory decree for the sale of security, and (3) deficiency judgments. On May 27, 1993, Dr. Kunimoto filed a two-count counterclaim seeking an accounting of certain sale proceeds and of the outstanding balance on all loans.

On November 5, 1993, BOH moved for summary judgment and an interlocutory decree of foreclosure. Dr. Kunimoto did not oppose the motion. On January 18, 1994, the circuit court granted the motion, issuing findings of fact (FOFs) and conclusions of law (COLs). An order approving the commissioner's report, confirming the commissioner's sale of certain real property at public auction, and directing distribution of the proceeds was entered on May 6, 1994 and amended on May 17, 1994. On June 1, 1994, BOH moved for deficiency judgments, and, on June 6, 1994, Dr. Kunimoto objected to BOH's exercising its option to accelerate the indebtedness.² Deficiency judgments in the amount of $1,699,577.30 were entered on July 5, 1994, in favor of BOH and against Dr. Kunimoto.

Dr. Kunimoto appealed to this court on August 4, 1994. On November 1, 1994, this court dismissed the appeal on the ground that Dr. Kunimoto's counterclaim had not been resolved. Thereafter, BOH moved for clarification of the circuit court's order to reflect resolution of Dr. Kunimoto's counterclaim on February 13, 1995. On May 25, 1995, Dr. Kunimoto, through a newly-hired attorney, Gregg Young, filed an application on behalf of Cappello and Hudgens to appear pro hac vice, pursuant to Rules of the Supreme Court of the State of Hawai`i (RSCH) Rule 1.9 (1993).³ Because of the unnecessary delay that would be caused in granting the application and continuing the hearing on BOH's motion to clarify, appellants' first application was denied without prejudice at a hearing in mid-June 1995.⁴ On June 23, 1995, the circuit court granted BOH's motion to clarify and entered final judgment against Dr. Kunimoto, who timely appealed.⁵ On December 12, 1995, Dr. Kunimoto, through

984 P.2d 1202

Young, filed a second application for pro hac vice status for Cappello and Hudgens. On December 28, 1995, the circuit court granted the pro hac vice application of Cappello and Hudgens, on the conditions that: (1) "there shall be meaningful participation by local counsel"; (2) "service shall be on local counsel"; and (3) "local counsel shall at all times remain lead counsel."

Meanwhile, BOH's attempts to collect the $1.6 million were ongoing and apparently unsuccessful. On November 20, 1995, BOH moved for a temporary restraining order (TRO) to prevent Dr. Kunimoto (1) from requesting to be paid to or accepting payments, namely from Hawaii Medical Services Association, through a sham corporation established to receive income on behalf of his ophthalmology practice and (2) from fraudulently transferring his medical practice. BOH attached to the motion a copy of findings of fact and conclusions of law filed by the United States Bankruptcy Court for the District of Hawaii on August 21, 1995, in In re Clark Emerson Venture, Inc., Case No. 92-01388 (chapter 11). Therein, the Bankruptcy Court expressly (1) found that Dr. Kunimoto had made false and misleading representations in his disclosure statements and related filings before the bankruptcy court and (2) concluded that Dr. Kunimoto had committed a fraud upon the bankruptcy court.

On December 1, 1995, BOH also moved for the appointment of an independent receiver to aid in the execution of the deficiency judgments. In its motion, BOH again detailed attempts by Dr. Kunimoto fraudulently to transfer his medical practice, as well as Dr. Kunimoto's suspected concealment of stocks. At a December 12, 1995 hearing, the circuit court stated:

In July 1995, the plaintiff, Bank of Hawaii, obtained a deficiency judgment in excess of $1.6 million against defendant Allan Kunimoto. Defendant Kunimoto is a practicing ophthalmologist and eye surgeon. In April, 1995, the defendant advised the Hawaii Medical Services Association that he had incorporated his medical business and requested that payments be made to capital A.R.K. Eye Care, Inc.

Thereafter, H.M.S.A. made payments to the corporate entity identified by the defendant. In fact, A.R.K. Eye Care, Inc. was not properly formed at the time and was not registered with the State Department of Commerce and Consumer Affairs. Additionally, while the defendant denied receiving monies from H.M.S.A., records obtained from H.M.S.A. indicate clearly, that substantial payments were made to him [in] 1995.

Further, the defendant's wife formed a second corporation named ... J.M.K. Services, Inc. on November 7th, 1995, which sought to receive funds from H.M.S.A. The circumstances surrounding the formation of A.R.K. Eye Care, Inc. and J.M.K. Services, Inc., and the communications with H.M.S.A. are, at best, suspicious to the court.

Finally, a federal bankruptcy judge found and concluded in August, 1995, that defendant Kunimoto had perpetrated a fraud on the U.S. Bankruptcy Court in the case entitled [In re Clark Emerson Venture, Inc.], Case Number 92-01388.

Further and finally, based on the evidence, the court has serious doubts about defendant Kunimoto's credibility as a witness.

The court further finds and concludes as follows.

First, it appears to the court that plaintiffs will probably prevail on the merits of their claims; that defendant Kunimoto has and would in the future probably engage in conduct or transfers which would violate or be in violation of Hawaii Revised Statutes Chapter 651C.⁶ The court is very concerned that defendant Kunimoto would dispose of income or assets without any payment to the plaintiff.

Second and most importantly, the harm or damage resulting to the plaintiff is severe,

984 P.2d 1203

immediate, and irreparable. The court believes and finds that the defendant continues to hinder, delay, or defraud the plaintiff by engaging in conduct which is in violation of Hawaii Revised Statutes, Chapter 651C. Defendant's conduct, an example of which is described in federal bankruptcy Judge King's findings of fact and conclusions of law and order, should not be tolerated.

Finally, the public interest would arguably be served by the issuance of a temporary restraining order in this case. Judgment debtors should not lie, deceive, or attempt to manipulate the legal system to avoid paying monies which are owed to a creditor.

. . . .

In addition[, ...] the court further finds that defendant Allan Kunimoto has made misrepresentations of material fact and engaged in a course of conduct designed to hinder and delay the plaintiff's collection efforts and that without the appointment of a receiver, the court believes that he would continue in his willful course of conduct and frustrate the plaintiff's efforts to account for and collect on its outstanding...

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