Lathrop v. Sakatani
| Decision Date | 21 August 2006 |
| Docket Number | No. 27472.,27472. |
| Citation | 141 P.3d 480 |
| Parties | Naoto LATHROP and Glenn Nobuki Murakami, individually and as members of Kiwi Kahala Llc, a Hawai`i limited liability company, and on behalf of Kiwi Kahala Llc, a Hawai`i limited liability company, Plaintiffs-Appellants, v. Michael David SAKATANI, individually and as a member of Kiwi Kahala Llc, a Hawai`i limited liability company, and as the controlling person of 808 Development Llc, a Hawai`i limited liability company; Michael David Sakatani and Christine Marie Sakatani, as husband and wife; and 808 Development Llc, a Hawai`i limited liability company, Defendants-Appellees, and Title Guaranty Escrow Services, Inc., a Hawai`i corporation, as third-party Account Holder of Escrow No. A4-105-0047, established pursuant to that certain Account Control Agreement, dated February 6, 2004; John Does 1-10; Jane Does 1-10; Doe Partnerships 1-10; Doe Corporations 1-10; Doe Entities 1-10; and Doe Governmental Units 1-10, Defendants. |
| Court | Hawaii Supreme Court |
Gary Victor Dubin, Honolulu, on the briefs, for plaintiffs-appellants.
Karin L. Holma, Honolulu, and Amara Harrell (of Bays, Deaver, Lung, Rose & Baba), on the briefs, for defendants-appellees.
The instant appeal is narrowly confined to whether the plaintiffs-appellants Naoto Lathrop and Glenn Nobuki Murakami [hereinafter, collectively, the plaintiffs], members of Kiwi Kahala LLC (Kiwi Kahala), are entitled to record a lis pendens (i.e., a notice of an action pending against real property)1 on 4908 Kahala Avenue, Honolulu, Hawai`i (the Kahala property or the property), formerly owned by defendants-appellees Michael David Sakatani (Michael), who is also a member of Kiwi Kahala, and his spouse, Christine Marie Sakatani (Christine) [hereinafter, Michael and Christine are collectively referred to as the Sakatanis]. Briefly stated, this litigation arises from a bitter partnership dispute between the plaintiffs and Michael. The plaintiffs principally alleged that Michael exerted unauthorized control and management of Kiwi Kahala and fraudulently diverted company assets to himself, the Sakatanis, and/or 808 Development LLC (808 Development), of which Michael is the sole member [hereinafter, the Sakatanis and 808 Development are collectively referred to as the defendants]. The plaintiffs also alleged that the defendants then used Kiwi Kahala's assets and monies for their real estate purchases and 808 Development's construction projects. The plaintiffs sought, inter alia, the dissolution of Kiwi Kahala, an accounting, and the return of Kiwi Kahala's assets, monies, and property.2 Subsequently, the plaintiffs filed a lis pendens upon the Kahala property. However, the Circuit Court of the First Circuit, the Honorable Eden Elizabeth Hifo presiding, expunged the lis pendens on August 30, 2005, pursuant to its grant of the defendants' motion to expunge the notice of pendency of the action (the motion to expunge).
On appeal, the plaintiffs raise a single point of error, essentially contending that the circuit court erred in expunging the lis pendens because the plaintiffs' complaint specifically sought partial title to, and partial possession of, the Kahala property — and not only money damages or equitable relief — as required by S. Utsunomiya Enterprises, Inc. v. Moomuku Country Club, 75 Haw. 480, 510, 866 P.2d 951, 966 (1994) ().
Based on the discussion below, we hold that the plaintiffs' appeal be dismissed as moot because the Kahala property has been sold.
As previously stated, the plaintiffs and Michael are members of Kiwi Kahala, a member-managed Hawai`i limited liability company formed to purchase, develop, and sell real estate. The plaintiffs and Michael hold a one-third interest each in Kiwi Kahala.
On May 31, 2005, the plaintiffs filed a complaint against the defendants. The plaintiffs alleged that Michael assumed "control over the books and records and the business, financial, and investments affairs of Kiwi Kahala," without their consent, and, inter alia, fraudulently diverted Kiwi Kahala's assets, monies, and property
into real estate purchases, transactions, and sales, including those of his personally and of the Sakatanis personally and of 808 [Development] personally, and/or into construction projects of 808 [Development], including and/or involving[,] for instance, ... 4908 Kahala Avenue[.]
Consequently, the plaintiffs, as the majority members of Kiwi Kahala, sought to dissolve Kiwi Kahala, pursuant to HRS §§ 428-801(4)(B) and -801(4)(E) (2004),3 and to wind up its affairs. The plaintiffs also asserted claims against Michael of, inter alia, breach of fiduciary duty, fraud, and breach of contract and prayed for, inter alia, an accounting. Moreover, the plaintiffs asserted claims of fraudulent transfers and conveyances against all defendants and sought an imposition of constructive trusts as to "all monies and all personal and real properties" that were allegedly wrongfully diverted to the defendants.4
Thereafter, on June 8, 2005, the plaintiffs filed a notice of pendency of the action with the circuit court. The notice provided that on May 31, 2005, this civil action was filed by the [p]laintiffs.
The outcome of this case will affect title to the real property ... situated at 4908 Kahala Avenue in the City and County of Honolulu.
The lis pendens was immediately recorded at the State of Hawaii Bureau of Conveyances against the Kahala property,5 which the Sakatanis owned as tenants by the entirety.6
On August 18, 2005, the defendants moved to expunge the lis pendens, on the grounds, inter alia, that the plaintiffs, in their complaint, did not claim to have any interest concerning or affecting the title or possession of the property, as required under Hawai`i case law and HRS § 634-51.7 In other words, the defendants averred that the instant lawsuit was not an action for which a lis pendens could be filed and that its filing constituted an improper attempt to obtain prejudgment attachment. Further, because the defendants had contracted to sell the property to a third-party buyer and the escrow closing was set for August 30, 2005, Michael stated in his declaration that:
If my wife and I do not close the escrow because of the Notice of Pendency of Action, we will have to continue paying the carrying costs on this property until this litigation is finalized.
On April 18, 2006, my Promissory Note ... will be due, and[,] if this litigation is not resolved[,] I will be unable to refinance that mortgage and will go into default.
A hearing on the motion to expunge was held on August 24, 2005. On August 30, 2005, the circuit court granted the defendants' motion to expunge. On the next day, the plaintiffs filed their notice of appeal.8 That same day, August 31, 2005, the plaintiffs filed with this court, and recorded at the State Bureau of Conveyances, a second lis pendens on the Kahala property. In response, the defendants filed another motion to expunge with this court, which was granted on November 21, 2005.
"Whether a lis pendens should be expunged is a question to be resolved in the exercise of the trial court's discretion; accordingly, the trial court's decision is reviewed for an abuse of that discretion." S. Utsunomiya v. Moomuku Country Club, 75 Haw. 480, 504, 866 P.2d 951, 964 (1994) (citations omitted). "In determining the validity of a lis pendens, courts have generally restricted their review to the face of the complaint." Id. at 505, 866 P.2d at 964 (citations omitted).
Knauer, 101 Hawai`i at 83, 63 P.3d at 391; see also TSA Int'l Ltd., 92 Hawai`i at 253, 990 P.2d at 723. "The [circuit] court abuses its discretion if it bases its ruling on an erroneous view of the law or on a clearly erroneous assessment of the evidence." Ranger Ins. Co. v. Hinshaw, 103 Hawai`i 26, 30, 79 P.3d 119, 123 (2003) (citation omitted). Stated differently, an abuse of discretion occurs where "the [circuit] court has clearly exceeded the bounds of reason or has disregarded rules or principles of law or practice to the substantial detriment of a party litigant." Roxas v. Marcos, 89 Hawai`i 91, 115, 969 P.2d 1209, 1233 (1998) (citation and internal quotations marks omitted).
As previously stated, the plaintiffs maintain that the lis pendens was valid under Hawai`i law and, thus, the circuit court erred in granting the motion to expunge. Specifically, the plaintiffs argue that their complaint clearly indicates that they are not seeking only money damages or equitable relief, but also partial title to and partial possession of the Kahala property to the extent that their partnership monies purchased the aforesaid property and/or the construction materials that are now a part of the property. In response, the defendants contend that: (1) the plaintiffs' appeal is moot inasmuch as, during the pendency of this appeal, the Kahala property was sold, thereby preventing this court from granting any effective relief; and (2) the circuit court did not abuse its discretion when it expunged the lis pendens because the plaintiffs' complaint does not concern title to or possession of real property, and there is no allegation that Kiwi Kahala owned the property. The plaintiffs, in their reply brief, counter that the sale was fraudulent. Moreover, they argue that, even assuming that the sale renders moot the issue presented on appeal, this court nevertheless should decide the matter because it falls within an exception to the mootness doctrine.
"This court has long held that jurisdiction is the base requirement for any court resolving a dispute because[,...
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