Association of Apartment Owners of Discovery Bay v. Mitchell. , 134 Haw. 251 ( 2014 )

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Electronically Filed
Supreme Court
SCWC-11-0000151
13-NOV-2014
07:51 AM
IN THE SUPREME COURT OF THE STATE OF HAWAII
---oOo---
________________________________________________________________
ASSOCIATION OF APARTMENT OWNERS OF DISCOVERY BAY,
Respondent/Plaintiff-Appellee,
vs.
RALPH MITCHELL, Petitioner/Defendant-Appellant.
________________________________________________________________
SCWC-11-0000151
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(CAAP-11-0000151; CIV. NO. 10-1-1871-08)
NOVEMBER 13, 2014
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY McKENNA, J.
I. Introduction
We have accepted certiorari in this case to vacate the
ICA’s judgment on appeal and to remand an award of attorneys’
fees and costs to the Circuit Court of the First Circuit
(“circuit court”). We hold that, on remand, the circuit court
shall determine whether Hawaii Revised Statutes (“HRS”)
§ 514B-161(a) (Supp. 2009) applies in this case. Further, if
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the statute applies, the circuit court should make a finding, on
the record, as to whether the Association of Apartment Owners of
Discovery Bay (“AOAO”) refused to mediate this dispute, and if
so, the circuit court should take into consideration such
refusal in determining whether to award attorneys’ fees and
costs. We also hold that, on remand, the circuit court shall
determine whether four time entries were correctly billed to the
instant matter.
II. Background
On August 30, 2010, the AOAO filed a complaint against
Ralph Mitchell, a condominium owner in the AOAO, for declaratory
and injunctive relief. The Complaint alleged that on August 11,
2010, Mitchell submitted a petition to the AOAO to conduct a
special meeting of the AOAO to remove one or more of the AOAO
Board members. The AOAO alleged that the petition did not
contain at least 25% of the owners’ signatures, contrary to the
requirements of HRS § 514B-121(b) (Supp. 2008). According to
the AOAO, Mitchell insisted that he intended to hold a special
meeting anyway. Therefore, the AOAO prayed for declaratory
relief in the form of an order finding that because Mitchell did
not have the requisite percentage of owner signatures on his
petition, there was no basis for conducting a special meeting.
The AOAO also alleged that Mitchell was obtaining signatures via
misrepresentation, so the AOAO also sought to enjoin this
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conduct. After Mitchell failed to answer the Complaint, the
circuit court1 entered a default against him.
The AOAO then filed a Motion for Summary Judgment (“MSJ”).
Attached to the motion was a spreadsheet prepared by the AOAO’s
property manager showing that, when the names of non-owners were
removed from Mitchell’s petition, he had only 24.1029% of the
owners’ signatures on the petition. The AOAO also attached an
updated spreadsheet showing that even fewer owners (23.7619%)
were interested in holding a special meeting, as many owners had
withdrawn their names from Mitchell’s petition. Therefore, the
AOAO argued that no genuine issue of material fact existed
regarding whether Mitchell had the requisite 25% of owners’
signatures on his petition, and the AOAO was entitled to
judgment as a matter of law. The AOAO also reserved its right
to file a motion seeking attorney’s fees and costs for having to
file the MSJ. The circuit court granted the AOAO’s MSJ.
Mitchell then submitted his Motion for Reconsideration of
the circuit court’s order granting the AOAO’s MSJ. Mitchell
asserted that he obtained 34.2969% of owners’ signatures on his
petition, attaching his list of owners and their ownership
percentages. Mitchell also stated he sought to mediate the
dispute in September 2010, but the AOAO did not respond to his
request and, instead, “plowed ahead with this litigation.”
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The Honorable Patrick W. Border presided.
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Mitchell requested that the circuit court set aside its order
granting the AOAO’s MSJ and stay the case to allow the parties
to mediate the dispute. The circuit court denied the motion.
The AOAO then filed a motion seeking $14,332.42 in fees and
costs under HRS § 514B-157(a) and (b) (2006), which provide, in
relevant part, the following (with emphases added):
Attorneys’ fees, delinquent assessments, and expenses of
enforcement. (a) All costs and expenses, including
reasonable attorneys’ fees, incurred by or on behalf of the
association for: . . . .
(3) Enforcing any provision of the declaration,
bylaws, house rules, and this chapter, or the rules
of the real estate commission;
against an owner, occupant, tenant, employee of an owner,
or any other person who may in any manner use the property,
shall be promptly paid on demand to the association by such
person or persons; provided that if the claims upon which
the association takes any action are not substantiated, all
costs and expenses, including reasonable attorneys’ fees,
incurred by any such person or persons as a result of the
action of the association, shall be promptly paid on demand
to such person or persons by the association.
(b) . . . If any claim by an owner is not
substantiated in any court action against an association,
any of its officers or directors, or its board to enforce
any provision of the declaration, bylaws, house rules, or
this chapter, then all reasonable and necessary expenses,
costs, and attorneys’ fees incurred by an association shall
be awarded to the association, unless before filing the
action in court the owner has first submitted the claim to
mediation, or to arbitration under subpart D, and made a
good faith effort to resolve the dispute under any of those
procedures.
Mitchell filed an Opposition to the AOAO’s fees and costs
motion. Mitchell argued that the AOAO “should be estopped from
seeking fees and costs, for they violated HRS § 514B-161 by
refusing to respond to Mitchell’s request to mediate the issues
raised in this case.” At the time this litigation commenced,
HRS § 514B-161(a) provided the following:
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If a unit owner or the board of directors requests
mediation of a dispute involving the interpretation or
enforcement of the association’s declaration, bylaws or
house rules, or a matter involving part VI, the other party
in the dispute shall be required to participate in
mediation. Each party shall be wholly responsible for its
own costs of participating in mediation, unless at the end
of the mediation process, both parties agree that one party
shall pay all or a specified portion of the mediation
costs. If a unit owner or the board of directors refuses
to participate in the mediation of a particular dispute, a
court may take this refusal into consideration when
awarding expenses, costs, and attorneys’ fees.
(Emphasis added.) According to Mitchell, he requested mediation
in early September 2010, which meant that “any prospect of his
calling a special meeting on his own[] was off the table.” To
support his statement, he appended a communication from the
Mediation Center of the Pacific, Inc., which had scheduled
mediation for September 27, 2010. He thus blamed the AOAO for
deciding to litigate, and sought to have the AOAO bear its own
fees and costs for its decision.
Mitchell also objected to the following four time entries
as “hav[ing] absolutely no bearing on this case”:
9/22/2010 TMR Review and respond to emails re scam of
Japanese tourists at Discovery Bay 0.20 hrs
9/23/2010 TMR Review and respond to emails re discovery
matter 0.30 hrs
11/01/2010 CPM Tele conf with Turman re subpoena in Itagaki
case 0.20 hrs
11/18/2010 MHB Review and organize facts re drug arrest,
hiding of assets, asset seizure and forfeiture, federal
indictment 0.40 hrs
The AOAO’s Reply did not address the four time entries
Mitchell challenged. The AOAO did, however, point out that HRS
§ 514B-161(a) allows a court to “take [a refusal to participate
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in the mediation of a particular dispute] into consideration
when awarding fees and costs,” but does not preclude an award of
fees altogether.
At a hearing on the motion, the circuit court granted the
AOAO’s motion for attorney’s fees and costs in the reduced
amount of $10,730.92, after determining that a reasonable
attorney billing rate was $150.00 per hour (versus the range of
$185-250 requested by the AOAO), and after cutting hours billed
for tasks that the circuit court did not consider to be complex.
The circuit court explained its reasoning as follows:
THE COURT: Mr. Perez-Mesa, I looked at the –- I looked at
the bill and there’s several things that I noted from it.
The temporary restraining order if I look at the cost bill
is said to have undergone several revisions and to have
taken 11.1 hours to prepare. That amount of time seems
excessive in light of the fact that the particular type of
work that’s involved is fairly mainstream and not a very
exotic form, so I would allow 5 hours of billing to prepare
the document.
There were in e-mails a total of 5.2 hours of
examining e-mails, which if billed at the top rate would be
for $1,300. The e-mails would seem to be for the most part
unnecessary, particularly in light of the fact that there
were significant billings, in fact, 7.3 hours for the time
spent with John Morris. And I know that he has some input
because he advises the board on their procedural matters
and so some contact with Mr. Morris would be appropriate,
but I would ask that you adjust the bill by taking into
account that the total number of hours for the bill would
be –- that would be allowable would be 5 hours for the
preparation of the TRO paperwork; that the bill would not
include the time spent on the e-mails; and that the total
amount of time that would be allowable for Mr. Morris in
consultation with him would be 3 hours.
The –- because I take a look at the complexity, the
relative complexity of the work and I don’t doubt that on
certain types of work that the things that are perhaps at
the cutting edge of litigation, but the top billing rate
for both you and Mr. Revere would be somewhat higher. I
think the amounts that I would allow, which is $150 per
hour, is appropriate to the type of work that is involved
here. So would you please adjust the bill. When it is
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submitted I will sign it and the motion for –- and also the
incidental expenses are okay.
MR. PEREZ-MESA: Your Honor, if we can summarize just so
I’m clear, so 5 hours is okay for the TRO, the meeting with
John Morris —-
THE COURT: Three hours for live meeting with John Morris
at that billing rate. Please remove the e-mails. I just
think those are probably –- I recognize there’s a certain
amount of getting up to speed on it. I wouldn’t bill him
for the learning curve if you follow what I’m getting at.
The circuit court did not address the four time entries Mitchell
challenged. The circuit court also did not address Mitchell’s
argument that the AOAO should be estopped pursuant to HRS
§ 514B-161 from seeking fees and costs for refusing to respond
to his request to mediate the issues in the case. The circuit
court entered Final Judgment, and Mitchell timely appealed.
B. The ICA Appeal
On appeal, Mitchell again argued that the AOAO’s refusal to
mediate the dispute precluded it from an entitlement of any fees
and costs under HRS § 514B-161(a). Mitchell again challenged
the four time entries. The AOAO did not address Mitchell’s
argument that its refusal to mediate precluded an award of fees
and costs under HRS § 514B-161, nor did it address the four time
entries.
While Mitchell’s appeal was pending before the ICA, he sold
his Discovery Bay condominium unit. Although the issue of
whether Mitchell obtained the requisite twenty-five percent of
owners’ signature for the special meeting thus became moot, the
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ICA went on to determine the question of attorneys’ fees and
costs, which is “ancillary to the underlying action and survives
independently under the Court’s equitable jurisdiction.” Ass’n
of Apartment Owners of Discovery Bay v. Mitchell, CAAP-11-
0000151 (App. Feb. 24, 2014) (SDO) at 2-3 (citing Queen Emma
Found. v. Tatibouet, 123 Hawaiʻi 500, 508, 510, 236 P.3d 1236,
1244, 1246 (App. 2010)). The ICA then determined that the AOAO
was the prevailing party in the underlying action, “without
regard to whether [the ICA thought] the trial court’s decision
on the underlying merits [was] correct,” because the AOAO had
been granted its MSJ. Mitchell, SDO at 4 (citing Tatibouet, 123
Hawaiʻi at 510, 236 P.3d at 1246).
As to Mitchell’s contention that the AOAO’s refusal to
mediate should have precluded it from an award of attorney’s
fees and costs under HRS § 514B-161(a), the ICA stated that
“such refusal may be taken into consideration in the award of
attorneys fees and costs, but [the statute] does not mandate
that it be considered.” Mitchell, SDO at 7. As to Mitchell’s
challenge to the four time entries, the ICA concluded, “It is
clear from the discussion the Circuit Court had with counsel
that the Circuit Court carefully examined the invoices before
adjusting the fee award.” Mitchell, SDO at 6. Therefore, the
ICA affirmed the circuit court’s judgment. Mitchell, SDO at 7.
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It subsequently denied Mitchell’s Motion for Reconsideration,
which once again challenged the four time entries.
III. Standard of Review
“The trial court’s grant or denial of attorney’s fees and
costs is reviewed under the abuse of discretion standard.”
Sierra Club v. Dep’t of Transp., 120 Hawaiʻi 181, 197, 202 P.3d
1226, 1242 (2009) (citations and brackets omitted). “The trial
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. In other words, an abuse of discretion occurs
where the trial court has clearly exceeded the bounds of reason
or disregarded rules or principles of law or practice to the
substantial detriment of a party litigant.” Maui Tomorrow v.
Bd. of Land & Natural Res., 110 Hawaiʻi 234, 242, 131 P.3d 517,
525 (2006) (internal quotation marks, citations, and brackets
omitted).
IV. Discussion
On certiorari, Mitchell challenges the ICA’s affirmance of
the fees and costs award as a matter of law, arguing that the
AOAO’s refusal to participate in mediation precluded it from
receiving an award of fees and costs under HRS § 514B-161(a).
HRS § 514B-161(a) contemplates a party’s refusal to participate
in mediation, and such refusal may impact a fees and costs
award, but it does not preclude the same: “If a party refuses
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to participate in the mediation of a particular dispute, a court
may take this refusal into consideration when awarding expenses,
costs, and attorneys’ fees.” While HRS § 514B-161(a) allows a
court the discretion to take a party’s refusal to mediate into
consideration in awarding fees and costs, we cannot assume that
the circuit court in this case exercised such discretion simply
by virtue of having reduced the AOAO’s fee award, because the
hearing transcript is silent on the matter. Mitchell expressly
raised the applicability of the statute (albeit as a basis for
precluding a fee award altogether). Given the legislature’s
intent to encourage mediation of condominium disputes,2 the
circuit court should have addressed whether HRS § 514B-161(a)
applied. In doing so on remand, the circuit court should
determine whether the AOAO refused to participate in mediation,
and if so, the circuit court should consider, on the record,
2
From our review of the record on appeal, we assume (but do not
decide) that Chapter 514B applies in this case. In 2004, the legislature
enacted Chapter 514B as a recodification of the Condominium Property Regime
chapter (HRS Chapter 514A). 2004 Haw. Sess. Laws Act 164, at 755. The 2004
legislature referred to the Hawaii Real Estate Commission’s December 31, 2003
Final Report to the Legislature as an “aid in understanding and interpreting”
the Act that became Chapter 514B. 2004 Haw. Sess. Laws Act 164, at 755.
That report, in turn, stressed the need for improved alternative dispute
resolution in condominium communities, because “the ‘mandatory’ mediation
provisions [of Chapter 514A] are essentially voluntary (with boards refusing
to mediate or going through the motions to avoid the appearance of non-
cooperation). . . .” Hawaii Real Estate Commission, “Final Report to the
Legislature, Recodification of Chapter 514A, Hawaii Revised Statutes
(Condominium Property Regimes), in Response to Act 213, Section 4 (SLH
2000),” at 34. In the instant case, Mitchell contends that the AOAO refused
to mediate. In passing HRS § 514B-161(a), the legislature encouraged the
courts to take into consideration a refusal to participate in the mediation
of a dispute when awarding attorneys’ fees and costs.
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such refusal in determining whether to award attorneys’ fees and
costs.
On certiorari, Mitchell also continues to challenge the
four time entries as belonging to a different matter. From what
we are able to glean from the record on appeal, it is unclear
how the four time entries are connected to the instant
litigation. Although Mitchell objected to the time entries
before the circuit court, the AOAO’s counsel never explained the
four time entries in its reply in support of its motion for fees
and costs, or at the hearing on that motion. The circuit court,
for its part, did not inquire about the four time entries at the
hearing on the motion for fees and costs. The ICA, for its
part, assumed that the circuit court “carefully examined” the
fee request, although the record seems to show otherwise, with
respect to these four time entries. Mitchell, SDO at 7. It
would appear that no court has yet to scrutinize the propriety
of these four time entries. We therefore remand this case to
the circuit court to determine whether these four time entries
were correctly included in the Mitchell matter.
V. Conclusion
We therefore vacate the ICA’s judgment on appeal and remand
this case to the circuit court. On remand, the circuit court
shall determine whether HRS § 514B-161(a) applies in this case.
If it does, the circuit court should determine whether the AOAO
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refused to participate in mediation, and if so, the circuit
court should consider, on the record, such refusal in
determining whether to award attorneys’ fees and costs. On
remand, the circuit court shall also determine whether four time
entries were correctly billed to the instant matter.
Lila Barbara Kanae /s/ Mark E. Recktenwald
for petitioner
/s/ Paula A. Nakayama
Terrance M. Revere and
Malia R. Nickison-Beazley /s/ Sabrina S. McKenna
for respondent
/s/ Richard W. Pollack
/s/ Michael D. Wilson
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