Meckley v. Peebles ( 2024 )

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
08-OCT-2024
07:53 AM
Dkt. 124 SO
NO. CAAP-XX-XXXXXXX
IN THE INTERMEDIATE COURT OF APPEALS
OF THE STATE OF HAWAI#I
EDWARD MECKLEY and BLUE DIAMOND PACIFIC, LLC,
Plaintiffs-Appellees,
v.
WILLIAM C. PEEBLES; SUSAN LEE PEEBLES; PEBCO LLC; and
PEBCO LIMITED LIABILITY COMPANY, Defendants-Appellants
and
WINDVISTA FARMS HAWAII LLC, Defendant-Appellee
and
JOHN DOES 1-10, JANE DOES 1-10 and DOE PARTNERSHIPS,
CORPORATIONS, GOVERNMENTAL UNITS or OTHER ENTITIES 1-10,
Defendants
WINDVISTA FARMS HAWAII, LLC, Defendant/Counterclaimant-Appellee;
and WILLIAM C. PEEBLES, Defendant/Counterclaimant-Appellant,
v.
BLUE DIAMOND PACIFIC, LLC and EDWARD MECKLEY,
Plaintiffs/Counterclaim Defendants-Appellees
APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT
(CASE NO. 3CC171000251)
SUMMARY DISPOSITION ORDER
(By: Leonard, Acting Chief Judge, Hiraoka and Nakasone, JJ.)
This case involves a dispute over a limited liability
company named Windvista Farms Hawaii LLC. Defendants William C.
NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER
Peebles and Susan Lee Peebles (collectively, the Peebles) appeal1
from the Amended Final Judgment for Plaintiffs Edward Meckley and
Blue Diamond Pacific LLC2 entered by the Circuit Court of the
Third Circuit on October 15, 2020.3 We affirm in part, vacate in
part, and remand for further proceedings consistent with this
summary disposition order.
The circuit court conducted a four-day bench trial in
March 2020.4 Findings of fact and conclusions of law were
entered on May 11, 2020. The trial court's findings not
challenged in the Peebles' statement of the points of error are
binding. Hawai#i Rules of Appellate Procedure Rule 28(b)(4)(C);
Okada Trucking Co. v. Bd. of Water Supply, 97 Hawai#i 450, 459,
40 P.3d 73, 82 (2002). The court found that Meckley filed
Windvista's articles of organization on August 1, 2011. Meckley
was the sole member and manager. Meckley bought equipment worth
$193,385 for Windvista in June 2013. In November 2013 Meckley
offered to buy real Property — four parcels called the Orchard
Lots and one parcel called the Pasture Lot — for Windvista. The
seller accepted Meckley's offer. Meckley didn't know it, but
William had also been trying to acquire the Property, and had
made several offers. After William learned that Meckley's offer
had been accepted, William contacted the seller. William
disparaged Meckley. He suggested that Meckley would be unable to
close the deal.
In November or December 2013, William approached
Meckley and asked to work with him to develop the Property. On
February 11, 2014, Meckley and William met to discuss terms.
1
Defendants Pebco LLC and Pebco Limited Liability Company are named
as appellants, but both were defaulted below, neither moved to set aside the
defaults, and neither participated in the trial.
2
Meckley is Blue Diamond's sole member. Blue Diamond has been a
member of Windvista since March 1, 2014.
3
The Honorable Henry T. Nakamoto presided.
4
The Honorable Jeffrey A. Hawk presided.
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Meckley took contemporaneous notes. The trial court found — but
the Peebles challenge — that Meckley and William agreed that
Pebco LLC would acquire a 75 percent interest in Windvista on
these terms: (1) Windvista will close the purchase of the
Properties; (2) Windvista will hold title and be the developer;
(3) Meckley will have an option to buy the Pasture Lot from
Windvista by a 1031 exchange for $400,000; (4) Meckley could buy
back 24 percent of Windvista at any time for $500,000; and
(5) Pebco LLC will consolidate and resubdivide the Orchard Lots
at William's sole cost and expense.
Meckley's and William's agreement was documented in a
Purchase Agreement. Meckley and William signed the Purchase
Agreement and an amended and restated Operating Agreement of
Windvista Farms at William's home on March 1, 2014. Windvista's
members were Blue Diamond and Pebco LLC. Meckley left William's
home without taking copies of either document. William denies
that the Purchase Agreement exists.
On March 17, 2014, Meckley added William to Windvista's
Bank of Hawai#i account. Since then, William has held himself
out as Windvista's owner and excluded Meckley from Windvista's
operations. William never consolidated or resubdivided the
Orchard Lots. In November 2014 William sold one of the Orchard
Lots without telling Meckley. In January 2015 Meckley began
trying to exercise his option to buy the Pasture Lot. In
June 2015 William sold another of the Orchard Lots without
telling Meckley. In September 2015, William and Susan altered
the Operating Agreement by substituting Susan for Pebco LLC as a
member of Windvista. William and Susan misappropriated
Windvista's funds and treated Windvista's assets as their own.
During a meeting on October 29, 2015, William rejected
Meckley's attempt to exercise his option to buy the Pasture Lot.
In September 2016 William sold the Pasture Lot for $740,000
without telling Meckley. On December 31, 2016, William and Susan
tried to dissociate Blue Diamond as a member of Windvista, but
the writing was not signed by all members of Windvista as
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required by Hawaii Revised Statutes (HRS) § 428-404(c)(1) (2004).
William excluded Meckley from Windvista's operations; sold
Windvista properties without consulting with Meckley; and failed
to honor Meckley's option to acquire the Pasture Lot for
$400,000. William locked Meckley out of the Property in
December 2017.
Meckley and Blue Diamond sued William, the Pebco
entities, and Windvista on July 28, 2017. An amended complaint
added Susan as a defendant. The Pebco entities were defaulted;
the defaults were never set aside and they did not participate in
the trial. A second amended complaint was filed on June 5, 2018.
Trial was held in March 2020. A judgment for Meckley and Blue
Diamond and against William, Susan, the Pebco entities, and
Windvista was entered on May 11, 2020. This appeal followed.
The Peebles raise eight points of error. We discuss each below.
(1) The Peebles contend the trial court erred by
denying their request to continue the trial so they could retain
counsel for themselves and Windvista. We review for abuse of
discretion. Kam Fui Tr. v. Brandhorst, 77 Hawai#i 320, 324, 884
P.2d 383, 387 (App. 1994). The Peebles and Windvista were
originally represented by counsel. On April 3, 2019, counsel
informed the court she had been discharged and had explained to
the Peebles that Windvista had to be represented by an attorney.
Eleven months later, on the first day of trial, the circuit court
granted Meckley's motion to default Windvista. Only then did
William request a continuance to hire "two attorneys, one to
handle Windvista, one to handle mine[.]" Meckley objected
because a witness was coming from Peru for the trial. Under
these circumstances the trial court acted within its discretion
by denying a continuance.
(2) The Peebles contend the circuit court erred by
granting Meckley's motion to compel discovery. We review for
abuse of discretion. Anastasi v. Fid. Nat'l Title Ins. Co., 137
Hawai#i 104, 111–12, 366 P.3d 160, 167–68 (2016). Meckley moved
to compel the Peebles to respond to his second, third, and fourth
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requests for production of documents. The Peebles didn't file an
opposition. When the motion was heard, William stated the
documents requested "have already been produced or do not
exist[.]" Meckley's counsel stated that the Peebles didn't serve
responses to the third or fourth requests. The court explained
to the Peebles: "You have to respond formally. If some things
do not exist, then you say so. If there are some things that you
have already produced, then you say so." The order granting the
motion was entered on July 25, 2019. The circuit court acted
within its discretion by ordering the Peebles to serve responses
to Meckley's written discovery requests.
(3) The Peebles contend the circuit court erred by
imposing discovery sanctions. We review for abuse of discretion.
In re Guardianship of Carlsmith, 113 Hawai#i 211, 223, 151 P.3d
692, 704 (2006). Meckley moved in limine to preclude the Peebles
from offering evidence of expenses they incurred to operate
Windvista, including checks and receipts, that were not produced
in discovery. The motion was heard on the first day of trial.
William stated: "We haven't given copies of actual checks, but
we've given him my check register."
The court explained to the Peebles: "Okay. So if
there are checks or other point of sale information that you want
to introduce that you haven't turned over, I am going to preclude
that. . . . I will let you testify about stuff that you have
turned over." The circuit court acted within its discretion by
precluding the Peebles from introducing into evidence documents
not produced in response to Meckley's written discovery requests.
See Hawai#i Rules of Civil Procedure (HRCP) Rule 37(b)(2)(B).
The Peebles do not cite any instance where they offered evidence
that was excluded despite it having been produced in discovery,
or for which no discovery request was made. A trial court does
not err by failing to admit evidence that is never offered.
(4) The Peebles contend the circuit court erred by
"refusing to consider the Peebles' request to compel [Meckley and
Blue Diamond to] comply with" the Peebles' discovery requests.
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The oral request was made during the hearing on Meckley's motion
to compel. The court explained: "You have to file a written
motion, typically, for that."
William asked, "I'm sorry. File a motion?"
The court answered, "Yeah, a motion."
William said, "Thank you."
The circuit court considered the Peebles' oral request.
It explained the procedure called for by HRCP Rule 37(a)(2). The
Peebles didn't follow up. Their contention of error is without
merit.
(5) The Peebles challenge finding of fact (FOF)
no. 21, about Meckley's and William's agreement on the terms
under which Pebco LLC would acquire an interest in Windvista. We
review for clear error. Est. of Klink ex rel. Klink v. State,
113 Hawai#i 332, 351, 152 P.3d 504, 523 (2007). The Peebles
argue Meckley didn't comply with the best evidence rule, Hawaii
Rules of Evidence (HRE) Rule 1002, and didn't establish the
Purchase Agreement was "lost or destroyed" under HRE
Rule 1004(1). But FOF no. 21 didn't involve the Purchase
Agreement, which wasn't signed until March 1, 2014. It was about
the agreement Meckley and William reached during their
February 11, 2014 meeting, and it was based on Meckley's
testimony and Exhibit 29 — Meckley's contemporaneous notes. It
was supported by substantial evidence and was not clearly
erroneous.
Even if FOF no. 21 implicated the contents of the
Purchase Agreement, the circuit court found (in unchallenged FOF
no. 23) that the February 11, 2014 agreement was memorialized in
the Purchase Agreement, which was signed along with the Operating
Agreement on March 1, 2014; Meckley did not take a copy of either
document when he left William's home; and William denies it
exists and "steadfastly refused to produce a copy[.]" Meckley's
testimony was admissible to prove the contents of the Purchase
Agreement under HRE Rule 1004(3).
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(6) The Peebles challenge FOF no. 34, that there was
"no evidence to support [William's] claim that he owns any part
of Windvista[.]" The circuit court found (in unchallenged FOF
no. 25) that William "unilaterally deleted Pebco, LLC [from the
Windvista Operating Agreement] and added [Susan] as a member,
though he did take the time to white out 'PEBCO, LLC, A Hawaii
limited liability company' above his name and signature." The
court found (in unchallenged FOF no. 26) that William and Susan
altered the Operating Agreement "by redacting the name of the
original member, Pebco, LLC and adding Susan Lee Peebles' name by
hand at the bottom[.]" The court found (in unchallenged FOF
no. 27) that "[a]s late as December 17, 2015, [William]
acknowledged that the ownership, if any, he held in Windvista was
in the name of Pebco, LLC, and not held personally by himself or
his wife." The court found (in unchallenged FOF no. 28) that
"Pebco, LLC would be responsible for the fiscal management of
Windvista[.]" In an appeal from a jury-waived trial, we "will
not pass upon the trial judge's decisions with respect to the
credibility of witnesses and the weight of the evidence, because
this is the province of the trial judge." State v. Kaneaiakala,
145 Hawai#i 231, 240, 450 P.3d 761, 770 (2019). FOF no. 34 was
not clearly erroneous.
(7) The Peebles challenge conclusion of law (COL)
no. 10,5 that "the actions of [the Peebles] in purporting to
dissociate [Meckley] and/or Blue Diamond Pacific, LLC from
Windvista are null and void ab initio." COL no. 10 is a mixed
finding and conclusion. It is supported by unchallenged FOF
no. 42, Exhibits 3 and 49, and correctly applies HRS § 428-
404(c)(1). It will not be overturned. Est. of Klink, 113
Hawai#i at 351, 152 P.3d at 523.
The Peebles contend the circuit court plainly erred
because HRS § 428-601(6)(A) provides for dissociation of a member
5
The Peebles' statement of the points of error identifies COL
no. 5, but their argument quotes COL no. 10.
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who becomes a debtor in bankruptcy. We decline to recognize
plain error because Exhibit 59 shows Meckley was a debtor in
bankruptcy, but Meckley was not a member of Windvista. Blue
Diamond was. The Peebles cite no evidence showing that Blue
Diamond was ever a debtor in bankruptcy. HRS § 428-601(6)(A)
(2004) does not apply.
(8) The Peebles contend the circuit court improperly
awarded Meckley and Blue Diamond their attorneys fees and costs
without requiring them to file a motion under HRCP Rule 54(d)(2).
They do not challenge the legal basis for the award. On the last
day of trial, the court ordered the parties to "submit any
proposed findings and orders and judgments, any requests for
attorney's fees and costs . . . within 30 days. . . . I want it
in a Word version submitted via email to the Court's email."
Meckley's counsel asked about the then-new Judiciary
Electronic Filing System.
The court said, "No, I don't want it filed. . . . Just
email it to me. You can send me a hard copy, as well. . . . But
I don't want it efiled." Accordingly, the record contains no
HRCP Rule 54(d)(2) motion for attorneys' fees and nontaxable
expenses.
The court's "Findings of Fact; Conclusions of Law;
[and] Order" stated:
H. Plaintiffs are awarded their attorneys' fees and
costs incurred in this action in the amount of $143,418.14
based on the Declaration of Stephen D. Whittaker and
Exhibits thereto filed with Plaintiffs' Proposed Findings of
Fact, Conclusions of Law and Order.
The Amended Final Judgment awarded Meckley and Blue
Diamond attorneys' fees and costs of $143,418.14. Thus, the
trial court clearly did not require the filing of an HRCP
Rule 54(d)(2) motion.
Meckley argues that HRCP Rule 54(d)(2) doesn't require
a motion when "the substantive law governing the action provides
for the recovery of such fees as an element of damages to be
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proved at trial[,]" and HRS § 428-1104 provides for recovery of
fees by a successful derivative action plaintiff. But HRS § 428-
1104 (2004) does not make attorneys' fees an element of damages,
and Meckley did not prove attorneys fees as damages at trial. He
did it by post-trial declaration of counsel, albeit at the
direction of the trial court.
The circuit court erred by awarding attorneys' fees and
nontaxable expenses without requiring a motion under HRCP
Rule 54(d)(2). We vacate the parts of the May 11, 2020 Findings
of Fact; Conclusions of Law; Order and the October 15, 2020
Amended Final Judgment that awarded attorneys' fees and non-
taxable costs, and remand for Meckley and Blue Diamond to have
the opportunity to file a motion under HRCP Rule 54(d)(2). The
May 11, 2020 "Findings of Fact; Conclusions of Law; Order" and
the October 15, 2020 "Amended Final Judgment" are affirmed in all
other respects.
DATED: Honolulu, Hawai#i, October 8, 2024.
On the briefs:
/s/ Katherine G. Leonard
Paul Alston, Acting Chief Judge
Laura P. Moritz,
for Defendants-Appellants /s/ Keith K. Hiraoka
William C. Peebles, Susan Associate Judge
Lee Peebles, Pebco LLC, and
Pebco Limited Liability Co. /s/ Karen T. Nakasone
Associate Judge
Peter Van Name Esser,
Stephen D. Whittaker,
for Plaintiffs-Appellees
Edward Meckley and Blue
Diamond Pacific, LLC.
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