Taniguchi v. Association of King Manor

Decision Date12 April 2007
Docket NumberNo. 27500.,27500.
Citation155 P.3d 1138
PartiesGlenn TANIGUCHI, Plaintiff-Appellant v. ASSOCIATION OF APARTMENT OWNERS OF KING MANOR, INC., a Hawai`i Non-Profit Corporation, Irvin King, Betty Takahashi, Henry Kennedy, Lynn Schneider, Audrey Asahina, Defendants-Appellees. and John Does 1-10; Jane Does 1-10; Doe Partnerships 1-10; Doe Corporations 1-10; and Doe Entities 1-10, Defendants.
CourtHawaii Supreme Court

Michael J. Park, Glenn T. Taniguchi, and Peter Y.L. Pong, on the briefs, for plaintiff-appellant.

John A. Morris and Gordon M. Arakaki (Ekimoto & Morris), Honolulu, on the briefs, for defendants-appellees.

MOON, C.J., LEVINSON, NAKAYAMA, ACOBA, and DUFFY, JJ.

Opinion of the Court by ACOBA, J.

Plaintiff-Appellant Glenn Taniguchi (Appellant) appeals from the August 24, 2005 judgment of the circuit court of the first circuit (the court)1 granting the Motion for Summary Judgment of Defendants-Appellees Association of Apartment Owners of King Manor, Inc. (the Association), Irving King (King), Betty Takahashi, Henry Kennedy (Kennedy), Lynn Schneider, and Audrey Asahina [collectively, Appellees] and denying Appellant's October 13, 2004 Motion to Set Aside the Order and June 14, 2005 Motion for Partial Summary Judgment as to Appellant's First Cause of Action.

We hold that (1) Hawaii Revised Statutes (HRS) § 514A-82(a)(14) (Supp.2005),2 which prohibited a resident manager of a condominium from serving on its board of directors, originally enacted as HRS § 514-20 on June 9, 1976, 1976 Haw. Sess. L. Act 239, §§ 3, 7 at 758-59, does not apply to the Association inasmuch as the Association's original bylaws were recorded prior to the enactment of HRS § 514-20, (2) the inclusion of Section 3.01 in the Association's First Restated Bylaws pursuant to HRS § 514A-82(a)(14), which prohibited a resident manager of a condominium from serving on the Board of Directors of the Association (the Board), exceeded the purview of HRS § 514A-82.2(b) (1993)3 relating to restatement of bylaws, (3) Appellant's purported "material facts" pertaining to the Board's failure to disclose to members of the Association (a) "the true nature of the controversy" herein, (b) "the exact language of the provisions in controversy," (c) "the rationale for each provision in controversy," (d) the Board's position "against adoption of the provision in controversy," (e) the Board's "inten[tion] to use any proxies granted to them," and (f) that the "failure to ratify the bylaws could mean the [A]ssociation would have to bring this controversy to the courts," viewed in a light most favorable to Appellant, do not raise a genuine issue of material fact that the Board breached a fiduciary duty of disclosure owed to members of the Association, (4) in any event, there is no effective remedy for Appellant's breach of fiduciary duties claims and the claim that the president of the board solicited proxies in violation of HRS § 514A-82(b)(4) (Supp.2005),4 (5) and, furthermore, such claims do not fall under the exception to the mootness doctrine, and (6) viewed in a light most favorable to Appellant, there is no genuine issue of material fact that the Second Restated Bylaws, adopted without the provisions disputed, are defective.

Therefore, the court properly granted Appellees' motion for summary judgment, and properly denied Appellant's motion to set aside the order and motion for partial summary judgment. Accordingly, the August 24, 2005 judgment of the court is affirmed.

I.
A.

On September 9, 1968, the Association was created under the provisions of the "Horizontal Property Act," chapter 107A, Revised Laws of Hawai`i 1955, with the filing of its Declaration of Horizontal Property Regime in the Bureau of Conveyances (the Bureau). Also on that date, the Association recorded its original bylaws with the Bureau. The original bylaws did not restrict a resident manager of the condominium from serving on the Board.

On June 9, 1976, the Hawai`i legislature adopted Act 239, which amended the former HRS § 514-20 entitled "Contents of bylaws," and added the following underscored language:

The bylaws shall provide for at least the following:

. . . .

(15) No resident manager of a condominium shall serve on the board of directors

1976 Haw. Sess. L. Act 239, § 3 at 758-59 (emphasis added). The legislature specified that Act 239 "not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before [June 9, 1976]." 1976 Haw. Sess. L. Act 239, §§ 5, 7 at 760.

On January 1, 1978, the legislature repealed HRS chapter 514, "Horizontal Property Regimes." 1977 Haw. Sess. L. Act 98, §§ 3, 5 at 181. Also as of January 1, 1978, HRS chapter 514A, "Horizontal Property Regimes," was enacted as a restatement of HRS chapter 514, without substantive change. 1977 Haw. Sess. L. Act 98, §§ 1, 5 at 162, 181. The former HRS § 514-20 was renumbered as HRS § 514A-82. Stand. Comm. Rep. No. 271, in 1977 Senate Journal, at 970.

On October 7, 1985, the Association recorded its "First Amendment to the By-laws of King Manor" in the Bureau.

On January 16, 2001, the Board resolved to restate its bylaws, entitled "First Restated Bylaws," pursuant to HRS § 514A-82.2.

On February 21, 2001, the Board recorded the First Restated Bylaws at the Bureau. The First Restated Bylaws organized into one document all existing provisions in the Association's original bylaws as well as the October 7, 1985 First Amendment. As pertinent here, these bylaws added Section 3.01 which provided, "No resident manager shall serve on the Board of Directors," purportedly to comply with HRS § 514A-82(a)(14), which as stated previously, was originally adopted as Act 239 on June 9, 1976.5 1976 Haw. Sess. L. Act 239, § at 758-59. Also on February 21, 2001, all pre-existing members of the Association were mailed a copy of the First Restated Bylaws.

B.

On September 16, 2001, after the Association had experienced problems with several of its resident managers, the Board hired two of its existing members, King and Ruby Clairmont (Clairmont), to share the job of resident manager. As compensation, King was permitted to occupy the apartment provided for the resident manager, and Clairmont received the salary of the resident manager. While working as resident managers of the condominium, King and Clairmont continued to serve as members of the Board, with King continuing in his capacity as board president.

Thereafter, Appellant, an attorney and member of the Association, approached the Board about Section 3.01 of the First Restated Bylaws which as noted above states, "No resident manager shall serve on the board of directors."6

On September 28, 2001, the Association's attorney, John Morris (Morris), answered the Board's inquiry as to "whether a resident manager of a condominium project can serve on its board of directors." Morris opined that as applied to the Association, "a resident manager of a condominium project can serve on its board of directors." Morris specifically concluded that (1) HRS § 514A-82(a)(14) only applies prospectively and, therefore, did not apply to the Association, and (2) because HRS § 514A-82(a)(14) did not apply to the Association, it could not be included in the First Restated Bylaws, restated pursuant to HRS § 514A-82.2, as it was not required by law.

On August 14, 2002, members of the Association were sent statements from William Enriques (Enriques), King,7 Clairmont, and Kennedy, candidates for the Board.

On September 17, 2002, Appellant sent a letter to the Board which stated that in his opinion, the Board should present the members of the Association with the First Restated Bylaws "for approval or disapproval at the next annual [A]ssociation meeting."

On October 3, 2002, the Board sent a letter to members of the Association pertaining to "amendment to bylaws." The letter stated,

Several apartment owners have asked that the owners be allowed to vote at the upcoming annual meeting to approve the restated bylaws. The board has agreed to that request.

The restated bylaws were completed by the [A]ssociation's prior attorney in 2001, approved by the board, and recorded. . . . A problem has now arisen because of certain changes which were made in the restated bylaws. The law permits the board to restate the declaration and bylaws, without owner approval, only to include: (i) all changes already approved by the owners; and (ii) any changes required by law. Any other changes must be approved by the owners.

Unfortunately, the restated bylaws for King Manor include provisions from the condominium law which are not required by law and were not approved by the owners. Therefore, those provisions should not have been included in the restatement.

Nevertheless, 65 percent of the owners can vote to include those provisions in the restated bylaws. Since and [sic] several owners have asked that the owners be allowed to vote on those provisions at the annual meeting, and since the board has agreed to that request, the issue will be presented for a vote at the upcoming annual seminar (on 15 October 2002), so the owners can decide.

For your information, the following provisions are included in the restated bylaws but are not required by law (but can be approved by 65 percent of the owners).

. . . .

3.01 . . .

Stating that no resident manager can serve on the board . . . .

Please review those sections and be ready to vote for or against them at the annual meeting.

(Some emphases added and some in original.)

At the Association's annual meeting held on October 15, 2002, the membership voted against including the provisions from HRS § 514A-82(a) in the First Restated Bylaws, which as noted before provided that "[n]o resident manager shall serve on the board of directors." Also at the October 15, 2002 annual meeting, King, Clairmont, and Kennedy were elected to the Board.

On November 4, 2003, the Board resolved to restate the bylaws a second time in a document...

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