Romspen Inv. Corp. v. JPL Haw., LLC

ROMSPEN INVESTMENT CORPORATION, Plaintiff, v. JPL HAWAII, LLC; BRIAN ANDERSON; IOLANI ISLANDER, LLC; SUPERIOR INVESTMENTS XIX, INC.;DOMINIS ANDERSON, AS TRUSTEE, under certain trust agreement dated May 14, 2018, and known as the GC Irrevocable Trust and under that certain trust agreement dated May 14, 2018, and known as the BC Irrevocable Trust; KUKULU, INC., Defendants.

SUPERIOR INVESTMENTS XIX, INC., Cross-Claimant, v. DOMINIS ANDERSON, AS TRUSTEE, under certain trust agreement dated May 14, 2018, and known as the GC Irrevocable Trust and under that certain trust agreement dated May 14, 2018, and known as the BC Irrevocable Trust; JPL HAWAII, LLC, Cross-Defendants.

KUKULU, INC., Cross-Claimant, v. JPL HAWAII, LLC; BRIAN ANDERSON, Cross-Defendants.

KUKULU, INC., Counter-Claimant, v. ROMSPEN INVESTMENT CORPORATION, Counter-Defendant.

No. 20-cv-00345 HG-RT

United States District Court, D. Hawaii

April 14, 2022

ORDER GRANTING COUNTER-DEFENDANT ROMSPEN INVESTMENT CORPORATION'S MOTION TO DISMISS COUNTS III AND IV OF COUNTER-CLAIMANT KUKULU, INC.'S COUNTERCLAIM (ECF NO 137)

HELEN GILLMOR UNITED STATES DISTRICT JUDGE

The original lawsuit in this case was filed by Plaintiff/ Counter-Defendant Romspen Investment Corporation ("Romspen") against Defendant JPL Hawaii, LLC ("JPL Hawaii") and various other Defendants seeking a decree of foreclosure in favor of Romspen for certain real property located on the Island of Hawaii ("Subject Property").

Beginning in October 2015, Romspen made a series of loans to Defendant JPL Hawaii related to the Subject Property. Romspen made loans to JPL Hawaii totaling more than $32 million dollars.

Romspen claimed JPL Hawaii defaulted on the loans and moved for foreclosure of the Subject Property. Defendant/Counter-Claimant Kukulu, Inc. ("Kukulu Inc.") was named as one of the Defendants in the original case because Romspen believed Kukulu, Inc. had an interest in part of the Subject Property.

Kukulu Inc. built a Spec House on Lot 2 and on Lot 5, which were part of the Subject Property. Kukulu, Inc. built the houses pursuant to two Development Agreements that it entered into with JPL Hawaii. Kukulu, Inc. subsequently entered into two Sales Agreements with JPL Hawaii to purchase Lot 2 and Lot 5.

Kukulu, Inc. filed a Counterclaim against Romspen, asserting various causes of action and seeking damages relating to the work it performed on Lot 2 and Lot 5.

Romspen moves to dismiss Counts 3 and 4 for breach of contract in Kukulu, Inc.'s Counterclaim. Romspen argues that Kukulu, Inc. has no standing to bring Counts 3 and 4 because Romspen and Kukulu, Inc. never contracted with each other. Romspen asserts that Kukulu, Inc.'s contracts were exclusively with JPL Hawaii.

Counter-claim Defendant Romspen's Motion to Dismiss Counts III and IV of the Counterclaim (ECF No. 137) is GRANTED.

PROCEDURAL HISTORY

On August 26, 2020, Plaintiff Romspen filed its FIRST AMENDED COMPLAINT. (First Amended Complaint, ECF No. 12).

On October 20, 2020, Defendant Superior Investments XIX filed its CROSSCLAIM against JPL Hawaii and Dominis Anderson. (ECF No. 43).

On November 18, 2020, Defendant Kukulu, Inc. filed its CROSSCLAIM against JPL Hawaii and Brian Anderson. (ECF No 54-2) .

Also on November 18, 2020, Defendant Kukulu, Inc. filed its COUNTERCLAIM against Plaintiff Rompsen. (ECF No. 54-1).

On December 14, 2020, the Parties filed a STIPULATION FOR DISMISSAL WITHOUT PREJUDICE OF KUKULU INVESTMENT FUND, which was ordered by the Court. (ECF Nos. 67 and 68).

On October 21, 2021, Kukulu, Inc. filed a Notice of Dismissal Without Prejudice of Counts I and II of the Counterclaim against Romspen. (ECF No. 134).

On October 25, 2021, Kukulu, Inc. filed a Motion for Summary Judgment against Romspen. (ECF No. 135).

ROMSPEN'S MOTION TO DISMISS IS DECIDED BY THIS ORDER:

On October 25, 2021, Romspen filed a Motion to Dismiss Counts 3 and 4 of Kukulu, Inc.'s Counterclaim. (ECF No. 137).

On November 5, 2021, the Court issued a STIPULATED FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER GRANTING PLAINTIFF ROMSPEN INVESTMENT CORPORATION'S MOTION FOR SUMMARY JUDGMENT AND INTERLOCUTORY DECREE OF FORECLOSURE AGAINST ALL PARTIES. (ECF No. 141) .

On December 17, 2021, Kukulu, Inc. filed an Opposition to Romspen's Motion to Dismiss Counts III and IV in the Counterclaim. (ECF No. 155).

On January 21, 2022, Romspen filed its Reply. (ECF No. 165) .

On March 16, 2022, the Court held a hearing on Romspen's Motion to Dismiss and Kukulu, Inc.'s Motion for Summary Judgment. (ECF No. 176). The decision on Kukulu, Inc.'s Motion for Summary Judgment shall be provided in a separate written order.

BACKGROUND

ALLEGATIONS IN THE FIRST AMENDED COMPLAINT:

Plaintiff/Counter-Defendant Romspen Investment Corporation ("Romspen") filed a First Amended Complaint against Defendant JPL Hawaii, LLC, Defendant/Counter-Claimant Kukulu, Inc., and various other Defendants seeking a decree of foreclosure for real property located on the Island of Hawaii. (First Amended Complaint ("FAC"), ECF No. 12).

Original Loans Between Romspen and JPL Hawaii

In October 2015, JPL Hawaii, LLC ("JPL Hawaii") executed a Note, in the amount of $16, 300, 000 in favor of Romspen, to obtain a Loan to develop certain parcels of real property on the Island of Hawaii. (FAC at ¶¶ 12-14, ECF No. 12).

The Loan was secured by a Mortgage in favor of Romspen. (Id. at ¶ 17(a)). Romspen asserts that Defendants Brian Anderson and Iolani Islander, LLC made and executed a Guaranty in favor of Romspen under which each guaranteed the Note. (Id. at ¶ 15-16).

JPL Hawaii's Note was secured by the Mortgage and by an Assignment of Sales Contracts and Proceeds, dated October 19, 2015, made in favor of Romspen. (Id. at ¶ 17(e)).

The Complaint Alleges There Were Three Amendments to the Original Loan Agreement Between Romspen and JPL Hawaii

In February 2017, Romspen and JPL Hawaii executed a First Amended Loan Agreement, with Romspen making an additional loan to JPL Hawaii for $7, 200, 000. (Id. at ¶¶ 18-20, 23).

In October 2017, Romspen and JPL Hawaii executed a Second Amended Loan Agreement, with Romspen making an additional loan to JPL Hawaii for $2, 500, 000. (Id. at ¶¶ 25-27, 30).

In October 2018, Romspen and JPL Hawaii executed a Third Amended Loan Agreement, with Romspen making an additional loan to JPL Hawaii for $6, 707, 000. (Id. at ¶¶ 31-33, 36).

According to the First Amended Complaint, Romspen loaned a total of $32, 707, 000 to JPL Hawaii for the Subject Property. (Id. at ¶¶ 14, 18, 25, 31-32).

ALLEGATIONS IN THE COUNTERCLAIM:

Kukulu, Inc. filed a Counterclaim against Romspen, seeking damages for its development and work relating to Lot 2 and Lot 5. (Tax Map Key No. (3) 6-9-013-002 and Tax Map Key No. (3) 6-9-013-005; Counterclaim, ECF No. 54-1).

Two Development Agreements Between JPL Hawaii and Kukulu Investment Fund

On August 28, 2018, JPL Hawaii entered into two Development Agreements with Kukulu Investment Fund: one for Lot 2 and one for Lot 5. (Development Agreement for Lot 2, at pp. 20-25, ECF No. 137-3; Development Agreement for Lot 5, at pp. 28-33, ECF No. 137-4).

The Development Agreements called for Kukulu Investment Fund to build a Spec House on Lot 2 and another on Lot 5. JPL Hawaii owned the Lots. JPL Hawaii and Kukulu Investment Fund agreed that upon completion of construction, each property would be sold for no less than $2.1 million dollars. (Id.)

Two Sales Agreements Between JPL Hawaii and Kukulu Investment Fund

On September 21, 2018, a month after JPL Hawaii and Kukulu Investment Fund entered into the two Development Agreements, they entered into two Agreements of Sale for each Lot 2 and Lot 5 (“Sales Agreements”). (Agreement of Sale for Lot 2, at pp. 1-19, ECF No. 137-3; Agreement of Sale for Lot 5, at pp. 1-27, ECF No. 137-4).

Each Sales Agreement memorialized the sale of a Lot to Kukulu Investment Fund for $599, 999. Payment was due 48 months later. (Id.)

Substitution of Kukulu, Inc. for Kukulu Investment Fund in Both the Two Development Agreements and the Two Sales Agreements

On October 29, 2020, JPL Hawaii and Kukulu Investment Fund entered into an agreement to modify their two Development Agreements and two Sales Agreements. (Correction and Amendment of Agreements of Sale (“Kukulu Inc. Substitution Amendment”), recorded on October 29, 2020, with an effective date of January 9, 2020, ECF No. 137-5).

Kukulu, Inc. was substituted for Kukulu Investment Fund as the contracting party with JPL Hawaii as to all four Agreements, with an effective date of January 9, 2020. (Id.)

Partial Settlement

On April 30, 2021, Romspen, JPL Hawaii, and Kukulu, Inc. executed a PARTIAL SETTLEMENT AGREEMENT REGARDING SALE OF LOTS 2 AND 5. (Partial Settlement Agreement, ECF No. 136-7).

In the Partial Settlement, the Parties agreed that Lot 2 and Lot 5 would be marketed and sold separately and apart from the rest of the Subject Property at issue in Romspen's Complaint for Foreclosure. (Id. at p. 2).

On November 5, 2021, a STIPULATED FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER GRANTING PLAINTIFF ROMSPEN INVESTMENT CORPORATION'S MOTION FOR SUMMARY JUDGMENT AND INTERLOCUTORY DECREE OF FORECLOSURE AGAINST ALL PARTIES was entered. (ECF No. 141).

In the Order, the Court recognized the Parties' agreement that Lot 2 and Lot 5 would be marketed and sold separately and apart from the rest of the mortgaged property and were not subject to foreclosure. (Id. at ¶¶ 34-35).

The Parties agree that following the Partial Settlement and Stipulated Order, Lot 2 and Lot 5 were each sold to a third-party buyer.

On August 23, 2021, Lot 2 was sold for $2, 550, 000, and Romspen released its liens on the Lot. (ECF No. 167).

On October 27,...