Rearden Family Trust v. Wisenbaker

• Decision Date: 25 March 2003
• Docket Number: No. 21937.,21937.
• Citation: 65 P.3d 1029,101 Haw. 237
• Parties: REARDEN FAMILY TRUST, Janice Rearden, Michael Rearden, Michael Rearden, Guardian ad Litem for Ryan John Rearden, Plaintiffs-Appellees, v. Michael WISENBAKER, Defendant-Appellant, and Stacy Marion Steffens, Midland Enterprises, Inc., Claudette Selak-Simon, Philip Bogetto, Doe Corporations 1-10, John Does 1-10, Jane Does 1-10 and Doe Attorneys 1-10, Defendants.
• Court: Hawaii Supreme Court

65 P.3d 1029

101 Haw. 237

REARDEN FAMILY TRUST, Janice Rearden, Michael Rearden, Michael Rearden, Guardian ad Litem for Ryan John Rearden, Plaintiffs-Appellees, v. Michael WISENBAKER, Defendant-Appellant, and Stacy Marion Steffens, Midland Enterprises, Inc., Claudette Selak-Simon, Philip Bogetto, Doe Corporations 1-10, John Does 1-10, Jane Does 1--10, Defendants.

No. 21937.

Supreme Court of Hawaii.

March 25, 2003.

Michael W. Moore (Menezes Tsukazaki Yeh & Moore), on the briefs, Hilo, for defendant-appellant.

Nicole L. Ezer, on the briefs, for plaintiffs-appellees Rearden Family Trust, Janice Rearden, and Michael Rearden, Guardian ad litem for Ryan John Rearden.

Michael Rearden, on the briefs, plaintiff-appellee pro se.

MOON, C.J., LEVINSON, NAKAYAMA, and ACOBA, JJ., and Circuit Judge AHN assigned by reason of vacancy.

Opinion of the Court by ACOBA, J.

We hold that Defendant-Appellant Michael Wisenbaker (Defendant) waived the defense of lack of personal jurisdiction under Hawai'i Rules of Civil Procedure (HRCP) Rules 12(b), (g), and (h) by failing to raise it in his pre-answer motion. However, we further hold that the third circuit court¹ (the court) erred in denying Defendant's motion to set aside the June 9, 1997 default judgment on liability rendered against him (motion to set aside). The default judgment had been entered pursuant to HRCP Rule 16 (1997) and Rules of the Circuit Courts of the State of Hawai'i (RCCH) Rule 12.1(a)(6) (1997) for Defendant's failure to appear personally at a settlement conference with his counsel and at a subsequent order to show cause (OSC) hearing to determine why such judgment should not be entered.

We conclude that the court had inherent power to require both a party and the party's counsel to attend a settlement conference. However, at subsequent hearings on Defendant's motion to set aside, the court suspended its decision on that motion and ordered the parties to engage in settlement conferences of the sort Defendant had failed to previously engage in, and for which failure default judgment had been entered. Defendant thus did engage in settlement negotiations.

Under these and the other circumstances we discuss herein, we conclude that the court's ultimate denial of Defendant's motion to set aside exceeded the bounds of reason. Accordingly, we vacate the July 17, 1998 judgment entered in favor of Plaintiffs-Appellees Rearden Family Trust (the Family Trust), Janice Rearden, Michael Rearden, and Ryan Rearden² (collectively, Plaintiffs) following a jury trial on damages and remand the case for disposition consistent with this opinion.

I.

A.

In 1985, Foundation Epsil Vaduz Liechtenstein (Foundation Epsil) purchased a parcel of real property consisting of approximately ten acres in North Kohala on the island of Hawai'i (the property). Foundation Epsil was a Liechtenstein corporate entity, created to administer the Family Trust. The property was the only asset it held. Michael was one of the board of "protectors" of Foundation Epsil. Plaintiffs' attorney, Jonathan Ezer, was the attorney-in-fact for Foundation Epsil.

On June 25, 1991, Midland Enterprises, Inc. (Midland) brought a suit in the third circuit in Civ. No. 91-290 against Michael, J. & J.S.R.T., Inc.,³ and Foundation Epsil to enforce a California State court judgment against Michael assigned to it by Claudette Selak-Simon.⁴ The suit sought recovery of $277,156.12 and an injunction prohibiting the sale of the property. The complaint stated that Midland is "a Texas Corporation with its major office of business in Dallas, Texas." Attorney Philip Bogetto represented Midland in the suit. The court dismissed the Midland suit on January 26, 1993, after Michael had the underlying California default judgment set aside.

B.

On July 2, 1991, Stacy Marion Steffens brought a suit in the third circuit in Civ. No. 91-285 against Michael and Foundation Epsil to enforce an alleged agreement⁵ between Steffens, Michael, and Foundation Epsil for the payment of one million dollars, which was to be secured by a lien on the property. The court granted the defendants' motion to dismiss the Steffens suit with prejudice and the Intermediate Court of Appeals (ICA) affirmed the dismissal by summary disposition order. See Steffens v. Rearden, 84 Hawai'i 268, 933 P.2d 105 (App.1997).

II.

A.

On December 22, 1993, Plaintiffs brought the present action against Defendant, Midland, Selak-Simon, Bogetto, and Steffens, claiming malicious prosecution, abuse of process, intentional infliction of emotional distress, tortious interference with contract, slander of title, defamation, and punitive damages arising out of the June 25, 1991 suit brought by Midland (Civ. No. 91-290) and the July 2, 1991 suit brought by Steffens (Civ. No. 91-285). As a result of the defendants' conduct, Plaintiffs alleged that "a sale of the subject property was lost," resulting in "financial loss." As to Defendant, the complaint states in part that (1) "[Defendant] was a resident of the State of Texas, doing business in the State of Hawai'i"; (2) "[a]t all times [Defendant] controlled [Midland] ... and used said corporation as his alter ego"; (3) "[o]n or about June 25, 1991, [Defendant⁶ ] filed a Complaint No. 91-290 against [Michael], Foundation Epsil who transferred their [sic] interest to [the Family Trust] and [Janice]"; (4) "[Defendant]'s Complaint was based on a fraudulently obtained California Judgment which he obtained from [Selak-Simon] and had transferred to himself for the sole purpose of harassing [Michael]"; and (5) "[t]he sole purpose of [Defendant]'s filing of the complaint was to vex and harass [Michael]. [Defendant]'s and Selak-Simon's actions were intended to be vindictive and for the sole purpose of causing harm to [Michael.]"

On July 13, 1994, the court filed a notice of dismissal as to all of the defendants for want of service under RCCH Rule 28.⁷ On July 20, 1994, Michael filed objections to the dismissal and requested a six-month extension to complete service "either directly or by substituted service." In response, the court ordered, on July 25, 1994, that the notice of dismissal be withdrawn "on condition that" service of the complaint be completed within ninety days. According to Michael's affidavit, "[o]n September 2, 1994, [he] caused a certified copy of the Complaint and Summons... to be served on [Defendant], by registered mail[.]" Exhibit A to Michael's affidavit, a postal service return receipt, is marked "restricted delivery" and "insured" and Defendant's name is signed below the words "Signature (Addressee)[.]"⁸ On September 27, 1994, Defendant, Midland, Bogetto, and Steffens moved to dismiss Plaintiffs' complaint. At this point, Bogetto represented himself, Defendant, Midland, and Steffens. Defendant argued, inter alia, that service by certified mail was not authorized. The motion did not assert the defense of lack of jurisdiction. In their January 18, 1995 memorandum in opposition to the motion to dismiss, Plaintiffs maintained that "[Defendant] was served properly in the State of Texas pursuant to [HRS §§ ] 634-35 and 634-36."

In a January 20, 1995 telephone conference regarding the motion to dismiss, the court ruled that "there [would be] no oral argument"⁹ and asked "whether [the parties] ha[d] anything to add to [their] position[s] at [that] point." Michael asserted that the "statute" allowed him to serve by "registered mail when a person has engaged in a business activity in the State of Hawai'i." When the court asked Bogetto if there was anything he would like to say, he said, "No." The court denied for "good cause" the motion to dismiss. On February 21, 1995, the court sua sponte dismissed Selak-Simon and Midland for lack of service under RCCH Rule 28.

B.

Defendant, Bogetto, and Steffens answered the complaint on July 21, 1995. In the answer, Defendant: admitted that "he is a resident of the State of Texas," but "denie[d] doing business in the State of Hawai'i"; stated that he had "insufficient information to form a belief as to the truth or falsity of" Plaintiff's allegation that Midland was Defendant's alter ego; asserted, inter alia, the defenses of lack of personal jurisdiction and insufficient service;¹⁰ and counterclaimed for malicious prosecution, abuse of process, and punitive damages.

On December 2, 1996, the court issued an order setting pretrial conferences pursuant to HRCP Rule 16. The order set for discussion, among other matters, settlement of the case.

On March 11, 1997, the court issued an order establishing the trial schedule and noticing a settlement conference to take place on April 12, 1997, pursuant to RCCH Rule 12.1. The order stated that "[c]lients ... shall be present at the Settlement Conference, unless expressly waived by the judge" and that "a Settlement Conference Statement is required." (Emphases added.) The order cautioned as follows:

This Order shall in no way supersede any applicable court rule; the requirements and deadlines herein are in addition to those set out by court rules. A violation of any part of this Order is subject to appropriate sanctions including dismissal of the case or entry of default judgment.

(Emphasis in original.)

III.

On April 7, 1997, Defendant, Bogetto, and Steffens timely filed their settlement conference statement. Plaintiffs did not file their settlement conference statement until June 10, 1997. The court did not impose any sanctions for Plaintiffs' violation of its order.

On April 11, 1997, a telephone conference was held. During the conference, the court rescheduled the settlement conference from April 12, 1997, to Sunday, April 20, 1997, because Defendant had a prior business commitment on April 12.

On April 18, 1997, Defendant filed an affidavit dated April 15, 1997, requesting that the court continue the settlement conference set for April 20. The affidavit averred in pertinent part that: (1) one of his office's clerical personnel signed...