Opinion ID: 2630997
Heading Depth: 6
Heading Rank: 4

Heading: the foreclosure of the Kona Surf Resort Hotel

Text: Hawaii Ventures objects to those fees incurred in connection with Receiver Park's participation in the foreclosure of the Kona Surf Resort Hotel, which, as previously stated, was owned by Otaka and under a contract of sale at the commencement of the instant foreclosure action. Specifically, Hawaii Ventures asserts that: The Receiver claims to have prevailed in the Kona Surf [Resort Hotel] foreclosure case, in establishing a first lien position on equipments. However, the claimed first lien was of no realizable value. The Receiver admitted that the tens of thousands of dollar spent on pursuing the lien on equipment was in vain. Yet the Receiver totally failed to pursue the genuinely valuable claims against the Kona Surf [Resort Hotel] collateral that were the basis of her appointment  that there was a diversion of funds from the Estate collateral to operate and maintain that hotel. (Emphasis added.) (Citations to the record and footnote omitted.) Subparagraph 3(i) of the August 24, 2000 appointment order expressly mandated Receiver Park to, inter alia, seek an accounting from [the] Otaka [Defendants] of all sums paid to Otaka's affiliates from December 4, 1994 and shall undertake reasonable efforts to recover such amounts paid to Otaka's affiliates. However, on March 30, 2001, the Otaka Defendants filed a motion to modify the aforementioned provision on the basis of an agreement reached between Hawaii Ventures and the Otaka Defendants. The Otaka Defendants requested the following modification to subparagraph 3(i): The Receiver shall accept from Otaka the amount of $550,000 plus interest . . . in satisfaction of the duty of [the Otaka Defendants] to account to the Receiver from sums paid to Otaka's affiliates from December 4, 1994 to the date of appointment of the Receiver, which duty was the original subject of this paragraph 3(i), and in satisfaction of the receivables shown on the balance sheets of the Hotel and HWB as of May 31, 2000 as due from Otaka and  due from Kona Surf [Resort Hotel] . Notwithstanding the preceding sentence, the Receiver shall retain any rights she may have to recover assets which are part of the Estate . . . and are subject to the pending foreclosure of the Kona Surf Resort Hotel in which she has been granted the right to intervene, which rights, if any, shall be satisfied solely from said assets in said foreclosure. But for the prosecution of such intervention and recovery of assets, no further actions by the Receiver shall be required or undertaken to recover the sums paid to Otaka's affiliates pursuant to the original paragraph 3(i) of this Order. (Emphases added.) Through its counsel, Hawaii Ventures indicated no objection to the motion and the amendment. Accordingly, on April 30, 2001, the circuit court granted the motion to modify and amended the appointment order as suggested by the Otaka Defendants. In other words, the aforementioned settlement left the Receiver with only the duty and power to recover assets which are part of the Estate . . . and are subject to the pending foreclosure of the Kona Surf Resort Hotel. Consequently, inasmuch as Hawaii Ventures voluntarily abandoned those genuinely valuable claims by settling with the Otaka Defendants, it cannot now assert that Receiver Park totally failed to pursue the genuinely valuable claims against the Kona Surf [Resort Hotel] collateral based on the diversion of hotel funds. Moreover, Receiver Park was within the power conferred upon her in the appointment order to pursue the claim for equipment against the Kona Surf Resort Hotel. [29] In fact, in a letter written to one of the Receiver's professionals, Hawaii Ventures' counsel pressed the Receiver to pursue the claim as it would be extremely important to avoid prejudice to the value of the Kona claim. As such, Hawaii Ventures cannot now complain about fees incurred with respect to a claim which it insisted Receiver Park pursue. [30]