Haw. Petroleum, Inc. v. Millennium Hi Carbon, LLC

• Docket Number: CAAP-20-0000484
• Decision Date: 23 August 2024
• Parties: HAWAII PETROLEUM, INC., A HAWAII CORPORATION, Plaintiff-Appellant, v. MILLENNIUM HI CARBON, LLC, A HAWAII LIMITED LIABILITY COMPANY, DAVID LESSER AND JON MAURER, Defendants-Appellees
• Court: Hawaii Court of Appeals

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HAWAII PETROLEUM, INC., A HAWAII CORPORATION, Plaintiff-Appellant, v. MILLENNIUM HI CARBON, LLC, A HAWAII LIMITED LIABILITY COMPANY, DAVID LESSER AND JON MAURER, Defendants-Appellees

No. CAAP-20-0000484

Intermediate Court of Appeals of Hawaii

August 23, 2024

NOT FOR PUBLICATION IN WEST'S HAWAI'I REPORTS AND PACIFIC REPORTER

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT(CIVILNO 3CC18100061K)

On the briefs:

Thomas R. Cole, for Plaintiff-Appellant.

David H. Lawton, for Defendants-Appellees.

Hiraoka, Presiding Judge, Wadsworth and Nakasone, JJ.

SUMMARY DISPOSITION ORDER

This appeal arises out of a dispute over whether two fuel storage tanks putatively owned by Plaintiff-AppellantHawaii Petroleum, Inc.(HPI) at Big Island Carbon LLC's (BIC) facility in Kawaihae Hawai'i, pursuant to 2010 and 2011 agreements in which BIC purchased petroleum products from HPI (Purchase Agreements), were included in a 2 015 bankruptcy sale of BIC's assets.Defendants-AppelleesMillennium HI Carbon LLC, David Lesser, and Jon Maurer(collectively, Millennium)^[1]assert that Millennium bought the tanks in the bankruptcy sale.HPI filed a Complaint to recover the tanks, contending that the tanks belonged to HPI, were not part of BIC's bankruptcy estate, and were not included in the sale to Millennium.We vacate the order denying HPI summary judgment and granting Millennium summary judgment.We remand for entry of summary judgment for HPI, where HPI's evidence established, as a matter of law, that its tanks were never the property of the bankruptcy estate.

HPI appeals from the (1)March 24, 2020"Findings of Fact, Conclusions of Law [(FOFs/COLs)] and Order Denying [HPI]'s Motion for Summary Judgment Against [Millennium][(MSJ)] and Granting [Millennium's]Cross Motion for Summary Judgment[(Cross-MSJ)]"(Order Denying HPI's MSJ and Granting Millennium's Cross-MSJ); and (2)July 28, 2020 Final Judgment, both filed and entered by the Circuit Court of the Third Circuit (Circuit Court).^[2]

On appeal, HPI raises three points of error, contending that the Circuit Court erred by (1) granting Millennium's Cross-MSJ because Millennium did "not own HPI's tanks"; (2) denying HPI's MSJ because HPI was entitled to "a writ of replevin to recover possession of its two tanks"; and (3) granting Millennium's attorneys' fees and costs.^[3] Upon review of the record on appeal and briefs submitted by the parties, giving due consideration to the arguments advanced and the issues raised, we vacate and remand.

The record of the summary judgment hearing reflects the following.The 2010 Purchase Agreement between HPI and BIC concerned, inter alia, the installation of HPI's 12,000-gallon diesel fuel storage tank (Fireguard Tank), to store bulk fuel that BIC planned to purchase from HPI.The 2010 Purchase Agreement granted BIC ownership of all improvements and equipment "except for title and ownership of the [Fireguard] Tank" that would "remain the sole property of HPI"; specified that bankruptcy would constitute a default; and provided remedies in the event of BIC's default, including removal of the Fireguard Tank, as follows:

SECTION ONE BULK FUEL TANKS AND TANK MONITORING AND SENSOR COST

Subject to the terms and conditions set forth herein HPI will supply one of its 12,000 gallon aboveground diesel fuel tanks with stairs for use on the Premises by [BIC] during the term of this Agreement ("HPI [Fireguard] Tank")

SECTION SIXTEEN OWNERSHIP OF IMPROVEMENTS

Upon the completion of the Bulk Fuel Tanks Project by HPI as set forth in this Agreement[,][BIC] will receive ownership of all of said improvements and equipment (except for title and ownership of the HPI [Fireguard] Tank and stairs which remain the sole property of HPI.) installed by HPI including all the, [sic] hoses, piping, concrete, and any and all materials and equipment installed on the Premises by HPI as set forth in this Agreement. . . .

SECTION TWENTY-SIX EVENTS OF DEFAULT

This Agreement may be terminated by HPI for default upon 10 days advanced written notice to [BIC].Default includes, but is not limited to, the following:

D. [BIC] becomes insolvent or commits an act of bankruptcy or takes advantage of any law for the benefit of debtors or [BIC's] creditors, or if a receiver is appointed for [BIC]; or

SECTION TWENTY-SEVEN REMEDIES

If an event of default occurs, HPI may, but shall not be required to, exercise any one or more of the remedies listed in subparagraphs A through C below in addition to remedies for breach of contract, loss of profits, injunctive relief or other remedies as provided for by law:

A.Collect from [BIC][specified fees] .

B.Exercise or pursue any remedy or cause of action permitted by this Agreement or applicable law.

C.Terminate this Agreement.Termination of this Agreement for any reason shall not relieve the parties of any obligation theretofore accrued under this Agreement.

D.Remove the HPI [Fireguard] Tank and stairs from the Premises.

(Emphases added.)

The 2011 Purchase Agreement between HPI and BIC concerned, inter alia, the loan of a 280-gallon oil tank (Oil Tank) owned by HPI for storage of petroleum products BIC planned to purchase from HPI.The 2011 Purchase Agreement provided that HPI would retain title to the loaned equipment, which included the Oil Tank, as follows:

2.Sale of Petroleum and Loan of Equipment.

(b)[HPI] shall lend to [BIC] certain equipment (the "Loaned Equipment") more fully set forth in the Equipment Schedule attached hereto and incorporated herein.Such Loaned Equipment shall be used solely for the storage and dispensing of petroleum products purchased from [HPI] hereunder.

(iii)[HPI] shall retain title to the Loaned Equipment at all times during the life of this Agreement ....

(Emphases added.)The list of loaned equipment attached as "Exhibit A" to the 2011 Purchase Agreement referenced the Oil Tank.

On November 5, 2012, BIC filed for Chapter 7 Bankruptcy in the United States Bankruptcy Court.In the bankruptcy proceeding, HPI was among the "List of Creditors" of BIC, the debtor.

On February 27, 2014, the bankruptcy court issued an order permitting the retention of a sale agent and approving the "Agency and Sale Agreement" between the bankruptcy trustee and the sale agent (Order Approving Agency and Sale Agreement).The trustee retained the agent "to assist in the sale of the turnkey operation and/or piecemeal machinery, equipment and support equipment, as listed on the attached Exhibit A(individually an 'Asset' and collectively the 'Assets') of [BIC][(List of Assets for Sale)]."The List of Assets for Sale did not include the Fireguard Tank and the Oil Tank at issue in this appeal.

On May 21, 2015, the bankruptcy court approved the sale of "substantially all assets of [BIC]" to Millennium, in its "Sale Order (I) Authorizing and Approving the Sale of All of [sic] Substantially All of [BIC]'s Assets Free and Clear of Liens, Claims, Encumbrances and Other Interests to [Millennium], and (II) Granting Related Relief"(Bankruptcy Sale Order).The Bankruptcy Sale Order approved the "Asset Purchase Agreement"(APA) between the trustee of BIC's bankruptcy estate and Millennium; ordered that any entities failing to timely object to the sale "are deemed to have consented"; ordered that the Bankruptcy Sale Order and the APA "shall be binding in all respects upon [BIC]'s estate, its creditors . . . [and] Millennium"; enjoined "all persons and entities," including creditors holding claims "in [BIC]'s interest in the Assets" from pursuing any claim against Millennium; and provided that "[f]ollowing the Closing Date, no holder of a Claim on or against [BIC] or the Assets shall interfere with Millennium's title to or retrieval, use and enjoyment of the Assets" based on such claim.The APA defined "Assets" as "all of the Debtor's owned assets . . . related to the Business wherever located," as follows:

Section 1.1Assets.Subject to the terms and conditions set forth herein, at the Closing the Seller [(bankruptcy trustee)] shall sell, transfer, assign and deliver to the Purchaser [(Millennium)], and the Purchaser shall purchase from the Seller, all of the Seller's right, title and interest on an "as is where is" basis free and clear of liens, claims and encumbrances (other than Assumed Liabilities as defined herein and permitted encumbrances) all of the Debtor's [(BIC)] owned assets, property and contractual rights related to the Business wherever located, including but not limited to the below listed items (collectively, the "Assets"):

(a) All equipment owned by the Debtor used or held for use in the operation of the Business (the "Equipment").A listing of the Equipment, to the best of the Seller's knowledge, is attached hereto as Exhibit A;

(Emphases added)(footnote omitted).The attached list of equipment assets, entitled "The Purchased Equipment"(List of Purchased Equipment), contained a photo and description of each item or items depicted in the photos.The List of Purchased Equipment did not contain the Fireguard Tank and Oil Tank at issue in this appeal.

On April 3, 2018, HPI filed a Complaint in the underlying action against Millennium, alleging that, regarding the Fireguard Tank and Oil Tank, HPI was entitled to "Replevin" in Count 1;^[4] replevin under the Hawai'i Uniform Commercial Code (UCC), HRS§ 490:2A-521^[5] in Count 2; and loss of use damages in Count 3.HPI alleged that "[t]he Fireguard Tank and Oil Tank were not part of the assets of BIC and remain the property of HPI throughout the bankruptcy proceeding."

Following the 2018 Complaint, a December 13, 2019 filing in the bankruptcy court entitled "Trustee's Report of Sale," reported the bulk sale of the Kawaihae Hawai'i facility for...