Roaring Lion, LLC v. Exclusive Resorts PBL 1, LLC

ROARING LION, LLC, a Montana Limited Liability Company;DAVID COWAN and NATHALIE COWAN; UMANG P. GUPTA andRUTH M. GUPTA, as Trustees of the Umang and Ruth Gupta Trustunder Trust Agreement dated January 18, 2000; and PAUOA BEACH 8LLC, a Hawaii Limited Liability Company, Plaintiffs/Appellees,

v. EXCLUSIVE RESORTS PBL 1, LLC, a Delaware Limited LiabilityCompany; and EXCLUSIVE RESORTS PBL3, LLC, a DelawareLimited Liability Company, Defendants/Appellants,and PAUOA BAY PROPERTIES, LLC, a Delaware Limited Liability Company;WHITE SAND BEACH LIMITED PARTNERSHIP, a Delaware LimitedPartnership; PAUOA BEACH REALTY LLC, a Hawaii LimitedLiability Company, JOHN DOES 1-50, Defendants/Appellees.

NO. 30152

NO. CAAP-12-0000003

INTERMEDIATE COURT OF APPEALS OF THE STATE OF HAWAI'I

Dated: April 24, 2013

NOT FOR PUBLICATION IN WEST'S HAWAI'I REPORTS AND PACIFIC REPORTER

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT

(CIVIL NO. 04-1-332)

MEMORANDUM OPINION

(By: Foley, Presiding Judge, Fujise and Ginoza, JJ.)

In this consolidated appeal, Defendants/Counterclaim Plaintiffs-Appellants Exclusive Resorts PBL1, LLC and Exclusive Resorts PBL3, LLC (collectively, ER Defendants) challenge two orders entered by the Circuit Court of the Third Circuit¹ (circuit court): (1) the October 1, 2009 "Findings of Fact,Conclusions of Law and Order Granting Plaintiffs' Motion To Enforce Settlement Agreement" (First Enforcement Order); and (2) the May 17, 2010 "Order Granting in Part Plaintiffs' Motion for Order to Show Cause Why [ER Defendants] Should Not Be Held in Contempt" (Second Enforcement Order).

The circuit court initially granted partial summary judgment in favor of the ER Defendants and against Plaintiffs/Counterclaim Defendants-Appellees Roaring Lion, LLC, David Cowan and Nathalie Cowan, Umang P. Gupta and Ruth M. Gupta, as Trustees of the Umang and Ruth Gupta Trust under Trust Agreement dated January 18, 2000, and Pauoa Beach 8 LLC (collectively, Plaintiffs). Thereafter, a settlement conference was held on July 10, 2008 (Settlement Conference) and a purported settlement agreement was placed on the record. The circuit court subsequently determined that the parties had entered into an enforceable settlement agreement and further ordered enforcement of the settlement agreement.

On appeal, ER Defendants contend that:

(1) the circuit court erred in holding that terms placed on the record at the July 10, 2008 Settlement Conference, along with post-conference negotiations, constituted an enforceable settlement agreement.

(2) the circuit court lacked jurisdiction to enter the Second Enforcement Order because the pending appeal of the First Enforcement Order divested the court of jurisdiction to materially and substantially change the First Enforcement Order.

We conclude that the circuit court erred in holding that the parties had entered into an enforceable settlement agreement. There being no enforceable settlement agreement, we need not reach ER Defendants' second issue on appeal regarding the circuit court's jurisdiction to enter the Second Enforcement Order.

I. BACKGROUND

The Plaintiffs and ER Defendants own real property in the Pauoa Beach subdivision (Pauoa Beach) of the Mauna Lani Resort in the County of Hawai'i. ER Defendants, as subsidiaries of Exclusive Resorts, LLC, a world-wide "destination club," provide its members with access to luxury vacation homes, including homes in Pauoa Beach. Plaintiffs sought to enjoin ER Defendants from operating the destination club in Pauoa Beach. Plaintiffs and ER Defendants filed a number of motions and cross-motions, all of which were eventually disposed of by various stipulations and orders, including orders granting partial summary judgment in favor of ER Defendants.

Subsequently, on July 10, 2008, the circuit court facilitated the Settlement Conference with Plaintiffs and ER Defendants, which lasted all day. The parties allegedly reached a preliminary settlement agreement that was read into the record. As stated on the record, the agreement contemplated that the parties would work cooperatively to amend the Pauoa Beach covenants, conditions, and restrictions (Pauoa Beach CC&Rs), with the general intent that the changes would prevent any destination club or other similar entity from operating at Pauoa Beach Resort, except that the ER Defendants would be grandfathered. In the course of putting the settlement on the record, counsel for the parties indicated that further work needed to be done to define or finalize certain terms. For instance, the parties still needed to define more specifically "destination club." Moreover, and importantly, the parties still needed to define and clarify the scope of the contemplated "grandfather clause," particularly in regards as to who could utilize the grandfather rights and who could be a "successor" to such rights. The parties anticipated finalizing and submitting to the circuit court within thirty days a fully executed document reflecting thesettlement terms, and that the Pauoa Beach CC&Rs would be amended within one hundred and twenty days after signing the settlement document.

During post-settlement conference negotiations, the parties attempted to define the open terms. The parties eventually agreed on all terms except the scope of the grandfather rights. Although the parties drafted proposed amendments to the Pauoa Beach CC&Rs, the parties could not agree on the definition of "successors and assigns." Thereafter, ER Defendants refused to execute a written settlement agreement, asserting that the parties were unable to resolve essential terms left open when the settlement agreement had been put on the record at the Settlement Conference.

Plaintiffs filed a "Motion to Enforce Settlement Agreement" (Motion to Enforce), which the circuit court heard on July 21, 2009. On October 1, 2009, the circuit court filed its First Enforcement Order, holding that there was a valid and enforceable settlement agreement.

On October 30, 2009, ER Defendants filed a notice of appeal from the First Enforcement Order. This appeal was docketed as appellate case number 30152.

Subsequently, alleging that ER Defendants had failed to abide by the circuit court's First Enforcement Order, Plaintiffs filed a "Motion For Order to Show Cause Why [ER Defendants] Should Not Be Held in Contempt" (Contempt Motion). The circuit court heard the Contempt Motion on February 25, 2010. On May 17, 2010, the circuit court entered its Second Enforcement Order.

On July 1, 2010, ER Defendants moved to stay the First and Second Enforcement Orders. On August 18, 2010, the circuit court granted ER Defendants' motion to stay, pending appeal from both orders.

On December 1, 2010, the circuit court filed a purported final judgment, but when Plaintiffs appealed from the judgment, this court dismissed the appeal for lack of appellate jurisdiction.

On December 5, 2011, the circuit court filed an Amended Final Judgment to correct deficiencies in the final judgment. ER Defendants timely appealed from the Amended Final Judgment, including with respect to the Second Enforcement Order.

II. STANDARD OF REVIEW

"A trial court's determination regarding the enforceability of a settlement agreement is a conclusion of law reviewable de novo." Assocs. Fin. Servs. Co. of Hawai'i v. Mijo, 87 Hawai'i 19, 28, 950 P.2d 1219, 1228 (1998).

Where the evidence in the record shows that all the essential elements of a contract are present, a compromise agreement among the parties in litigation may be approved by the court and cannot be set aside except on the grounds that would justify rescission. Generally, in the absence of bad faith or fraud, when parties enter into an agreement settling and adjusting a dispute, neither party is permitted to repudiate it.

However, since very important rights are at stake in most cases, appellate courts must strive to ensure that the purported compromise agreement sought to be enforced is truly an agreement of the parties.

Miller v. Manuel, 9 Haw. App. 56, 63, 828 P.2d 286, 291 (1991) (citations omitted) (emphases added), cert. denied, 72 Haw. 618, 841 P.2d 1075 (1992). "To determine the validity of the settlement agreement, the court looks to the totality of the circumstances surrounding the making of the agreement." Ziarko v. Soo Line R.R., 161 Ill.2d 267, 204 Ill.Dec. 178, 186, 641 N.E.2d 402, 410 (1994). Accord Scurry v. Cook, 206 Ga. 876, 59 S.E.2d 371, 373 (1950).

87 Hawai'i at 28-29, 950 P.2d at 1228-29.

In Mijo, the Hawai'i Supreme Court also stated that "[w]hether the parties in fact entered into an agreement is essentially a question of fact." Id. at 28, 950 P.2d at 1228.In that case, however, the lower court had held an evidentiary hearing in the course of deciding a motion to enforce a settlement agreement.

In Miller v. Manuel, 9 Haw. App. 56, 828 P.2d 286 (1991), where no evidentiary hearing was held in the lower court to resolve a motion to enforce a purported settlement agreement, this court held that it would review the lower court's order granting the motion to enforce a settlement as if it were a summary judgment ruling. Id. at 63-64, 828 P.2d at 291-92. "Thus, the question is whether the evidence presented to the trial court indicated that there was no genuine issue of material fact and that as a matter of law the parties had entered into a valid compromise agreement." Id. at 64, 828 P.2d at 292.

Because there was no evidentiary hearing held in the circuit court in this case, we will review the circuit court's First Enforcement Order as if it were a summary judgment ruling. Moreover, the parties agree on appeal that whether they entered into an enforceable settlement agreement is determined by a review of the statements put on the record at the July 10, 2008 Settlement Conference. Thus, the record is undisputed and we must simply determine whether the statements made at the July 10, 2008 Settlement Conference, as reflected in the transcripts from the Settlement Conference, establish that the...