Island Title Corp. v. Bundy, Civ. No. 06-00448 ACK-BMK.
| Decision Date | 11 April 2007 |
| Docket Number | Civ. No. 06-00448 ACK-BMK. |
| Citation | 488 F.Supp.2d 1084 |
| Parties | ISLAND TITLE CORPORATION, Plaintiff, v. Barry W. BUNDY; Michael R. Mullholland; Alan Katsuzo Kozuki And Nelly Kozuki; Department of Taxation, State of Hawai'i; United States of America; Department of Treasury; Internal Revenue Service; Department of Labor & Industrial Relations, State of Hawaii, Defendants. |
| Court | U.S. District Court — District of Hawaii |
Jade L. Ching, Jason H. Kim, Shellie K. Park-Hoapili, Alston Hunt Floyd & Ing, Honolulu, HI, for Plaintiff.
Steven B. Songstad, Wailuku, HI, Mary H.Y. Bahng, Frances E.H. Lum, Office of the Attorney General, Honolulu, HI, Adam F. Hulbig, U.S. Department of Justice, Washington, DC Edric Ming-Kai Ching, Office of the United States Attorney, Honolulu, HI, for Defendants.
ORDER GRANTING DEFENDANT UNITED STATES' MOTION FOR SUMMARY JUDGMENT AND GRANTING IN PART AND DENYING IN PART DEFENDANT DEPARTMENT OF TAXATION, STATE OF HAWAII AND PLAINTIFF ISLAND TITLE'S MOTIONS FOR SUMMARY JUDGMENT
On July 12, 2006, Island Title Corporation ("Plaintiff') filed a Complaint in the Circuit Court of Hawaii, Second Circuit, seeking to interplead $32,947.33 ("interpleader funds") in excess proceeds from the non judicial foreclosure sale of certain real property once owned by Defendants Alan Katsuzo Kozuki and Nelly Kozuki. Island Title named as defendants a number of parties it perceived might claim an interest in the interpleader funds, including Barry W. Bundy, Michael Mulholland, Alan and Nelly Kozuki ("Kozuki Defendants"), the United States, the Department of Treasury of the United States, the Internal Revenue Service of the United States, the State of Hawaii, the Director of Taxation, State of Hawaii ("Hawaii DOT"), and the Department of Labor and Industrial Relations of the State of Hawaii ("Hawaii DLIR").
On August 17, 2006, the United States removed the instant interpleader action from Hawaii state court to this Court.
On August 29, 2006 the following parties' Answers to the Complaint and Affirmative Statements of a Claim to the interpleader funds were transmitted to this Court: Defendants Bundy and Mulholland, Defendant Hawaii Department of Labor and Industrial Relations, and Defendant Director of Taxation, State of Hawaii. On September 19, 2006, Defendant United States filed its Answer to the Complaint.
Upon application by Island Title, the Clerk of the Court entered default against the Kozuki Defendants on September 5, 2006.
On February 12, 2007, Defendant United States of America filed a Motion for Summary Judgment ("U.S.Motion") and a Concise Statement of Facts ("U.S.CSF") requesting distribution of the full amount of the interpled funds remaining after the initial distribution to Hawaii DOT. Defendant United States also argues that its share of the interpleader funds cannot be diminished by the award of attorney's fees and costs to Plaintiff.
On February 13, 2007, Plaintiff Island Title filed a Motion for Summary Judgment (" ") and a Concise Statement of Facts ("Island Title CSF") asking the Court to:
1. Direct Island Title to deposit the interpleader funds into the Registry of the Court;
2. Award Island Title reasonable attorneys' fees and costs to be charged against the interpleader funds;
3. Enjoin Defendants from presenting any suit against Island Title in regard to the interpleader funds;
4. Order the Defendants to interplead their respective claims;
5. Grant Island Title further relief as the Court deems proper.
Defendant Hawaii DOT also filed a Motion for Summary Judgment ("Hawaii DOT Motion") and a Concise Statement of Facts ("Hawaii DOT CSF") on February 13, 2007, arguing that its claim to the funds has priority over both Defendant United States' claim and to Plaintiff Island Title's request for attorney's fees and costs.
On February 21, 2007, Hawaii DLIR filed a statement of no opposition to Defendant Hawaii DOT's Motion for Summary Judgment. On March 14, 2007, Hawaii DLIR filed a statement of no opposition to Defendant United States' Motion for Summary Judgment. The same day, Hawaii DLIR filed a statement of no position on Plaintiff Island Title's Motion for Summary Judgment.
On March 20, 2007, the United States filed an Opposition ("U.S.A.Opp.") to Plaintiff Island Title's Motion and a Concise Statement in Opposition ("U.S.A.Opp.CSF"). The same day, Defendant Hawaii DOT filed a statement of position to Plaintiff Island Title's Motion. Defendant Hawaii DOT also filed a statement of no opposition to Defendant United States' Motion for Summary Judgment.
On March 22, 2007, Plaintiff Island Title filed an Opposition to both Defendants United States' and Hawaii DOT's Motions for Summary Judgment ("Island Title Opp.").
On March 29, 2007, Plaintiff Island Title filed a Reply to Defendant United States' Opposition to Plaintiffs Motion for Summary Judgment.
The hearing on Defendant United States' Motion for Summary Judgment, Defendant Hawaii DOT's Motion for Summary Judgment, and Plaintiff Island Title's Motion for Summary Judgment was held on Monday, April 9, 2007 at 2:30 p.m.
The parties do not dispute the facts that gave rise to the interpleader funds. Alan and Nelly Kazuki defaulted on a second mortgage held by First Hawaiian Bank that was secured by real property located at 828 Aukai Place, Wailuku, Hawaii 96743. See U.S. Exh. "A", Hulbig Decl. at A000004, ¶ 3; Island Title Exh. "A". After mailing a Notice of Intent to Foreclose Under Power of Sale to the Kozuki Defendants and all other parties known to have liens or interests in the property, on May 23, 2003, First Hawaiian Bank conducted a non-judicial foreclosure sale of the property to satisfy the amount owing on its second mortgage interest. See U.S. Exh. "A", Hulbig Decl. at A000004, ¶ 3(o); A000013.
At the non judicial foreclosure sale, the property was sold to Defendant Barry W. Bundy for $120,000. See U.S. Exh. "A" to Hulbig Decl.; Island Title Exh. "B." The transaction for the purchase of the sale of the property closed on November 5, 2003, and title was transferred by quitclaim deed to Defendant Bundy, Defendant Michael R. Mulholland, and Mulholland's wife. See U.S. Exhs. "B", "D" to Hulbig Decl., at A000146; Island Title Exh. "D". Island Title served as the escrow and settlement agent for the closing. See Complaint at ¶ 18; Island Title, Kim Decl. at ¶ 2.
The excess sale proceeds after paying off First Hawaiian Bank's second mortgage interest totals $32,947.33, which is currently held in escrow by Island Title. See U.S. Exh. "D" to Hulbig Decl. at A 000193; Island Title, Kim Decl. at ¶ 3. These excess sale proceeds are the interpleader funds at issue in this case.
In their answers to the Complaint, Defendants Bundy, Mullholland, the United States, the Department of Labor Industrial Relations of the State of Hawaii, the Department of Taxation of the State of Hawaii, and Island Title all made claims to the interpleader funds.
Defendants Bundy and Mulholland alleged in their Answer that they have a claim to the entirety of the sums sought to be interpled, but did not state a basis for their claim. See Bundy & Mullholland Answer at ¶ 4. Bundy and Mullholland did not respond to the United States' written discovery requests, including a request for an admission that they "have no legal or equitable interest in the Interpleader Funds." See U.S. Hulbig Decl. at ¶ 2, Exh. "K" to Hulbig Decl.
Defendant Hawaii Department of Taxation ("Hawaii DOT") seeks to apply the interpleader funds to Defendant Nelly Kozuki's outstanding state employment tax liabilities for the tax periods of August 1998 and September 1998. See U.S. Exh. "H" to Hulbig Decl.; Hawaii DOT, Hondo Aff. at ¶ 4a. On or around October 29, 1998, Hawaii DOT sent Defendant Nelly Kozuki a Statement of Taxes Due for the August and September, 1998 tax periods. See Hawaii DOT, Hondo Aff. at ¶ 4c, Exh. "A". On December 11, 1998, Hawaii DOT sent Defendant Nelly Kozuki a Final Collection Notice of the taxes owed for the August and September, 1998 tax periods. Id. at ¶ 4d, Exh. "B". As of April 9, 2007, the state tax lien for which Hawaii DOT seeks to apply the interpleader funds totals $9,501.90. See Hawaii DOT Reply at ¶ 7; Hawaii DOT CSF Hondo Aff. at ¶ 4e.
Defendant United States of America ("U.S.A.") seeks to apply the interpleader funds to outstanding federal employment tax liabilities of Defendant Nelly Kozuki for the tax periods ending September 30, 1998 and December 31, 1998. See U.S. CSF at ¶ 9. The IRS assessed taxes, penalties, and interest for the September, 1998 tax period on December 14, 1998 and for the December, 1998 period on April 19, 1999. See U.S. CSF at ¶ 9, Exhs. "F", "G" to Hulbig Decl. The U.S. recorded a federal tax lien with the Hawaii Bureau of Conveyances on October 15, 1999. Id. At the hearing, Defendant United States asserted that its tax lien on the interpleader funds totals approximately $75,000.2
Defendant Hawaii Department of Labor & Industrial Relations ("Hawaii DLIR") initially alleged its interest in the interpleader funds arising from Defendant Nelly Kozuki's outstanding state unemployment tax liabilities for the periods from April, 1999 to March, 2001. See Hawaii DLIR Answer, Exh. "A". Subsequently, Hawaii DLIR filed statements of no opposition to both Defendant Hawaii DOT's Motion for Summary Judgment and Defendant United States' Motion for Summary Judgment. Hawaii DLIR also filed a statement of no position on Plaintiff Island Title's Motion for Summary Judgment.
Plaintiff Island Title seeks to recover its attorneys' fees and costs incurred in this matter from the interpleader funds. See Complaint at ¶ 22. As of December 2006, Plaintiff Island Title claims it had incurred $7,309.45 in attorneys' fees and costs. See Island Title CSF ¶ 9, Ching Decl., Exh.
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