Opinion ID: 4105822
Heading Depth: 3
Heading Rank: 1

Heading: Complaint and Answers

Text: On April 13, 2012, the AOAO filed a Complaint against property managers CMI and Chaney Brooks, and commercial tenants 1 Chaney Brooks filed a joinder to the Joint Application. Bruser, Tokyo Joe’s, Inc., Michael T. McCormack, and Signa S. McCormack also filed a joinder to the Joint Application. 4  FOR PUBLICATION IN WEST’S HAWAII REPORTS AND PACIFIC REPORTER  Bruser, TJI, and the McCormacks due to the unbilled or erroneously billed electricity costs. The AOAO alleged the following against either or both of CMI and Chaney Brooks: breach of contract (Count I), breach of fiduciary duty (Count II), and negligence (Count III). The AOAO alleged the following claims only against CMI: negligent misrepresentation (Count IV) and breach of the covenant of good faith and fair dealing (Count V). The AOAO also included the following claims against the commercial tenants Bruser, TJI, and the McCormacks’ trusts: indemnification (Count VI) and unjust enrichment (Count VII). Lastly, the AOAO raised claims for surety and guaranty obligations (Count VIII) and declaratory relief (Count IX) against Bruser, the McCormacks, and the McCormack trusts. The AOAO filed its First Amended Complaint three days later, raising the same claims. Defendant Chaney Brooks filed its Answer, denying the allegations raised in Counts I and II in the Complaint, and raising the defense of laches. Defendant CMI also filed its Answer, denying the allegations raised in all of the counts of the Complaint, raising the defense of unclean hands, and giving notice that it would assert other defenses constituting affirmative defenses as set forth in Hawaii Rules of Civil Procedure Rule 8(c) as the matter progressed. The commercial tenants filed their Answer, denying the allegations raised in 5  FOR PUBLICATION IN WEST’S HAWAII REPORTS AND PACIFIC REPORTER  all of the counts of the Complaint, and raising the defense of laches. 2. Bruser and TJI’s Motion for Partial Summary Judgment Bruser and TJI filed a motion for partial summary judgment [50:765-91], arguing that the AOAO was obligated to bill them the electricity costs but never had; therefore, Bruser and TJI were not responsible for paying the unbilled electricity costs, and the AOAO could not seek indemnification from them under Section 6.02 of the Bylaws for the same. Chaney Brooks and CMI joined in the motion for partial summary judgment. The circuit court granted Bruser and TJI’s motion for partial summary judgment. It also dismissed the rest of the claims against Bruser and TJI (i.e., restitution/unjust enrichment and quasisurety and guaranty) on the grounds of estoppel and laches. 3. CMI’s Motion for Summary Judgment Around the same time that Bruser and TJI filed their second motion for partial summary judgment, CMI filed its motion for summary judgment, asking the circuit court to dismiss all claims against it based on the doctrine of laches. It argued that the AOAO knew of the incomplete and incorrect electricity billings around 2000-2002 and waited 10-12 years to bring its lawsuit. CMI argued that the AOAO’s delay was unreasonable and resulted in severe prejudice to CMI, as “[c]ritical witnesses have died, critical facts cannot be recalled by those witnesses who have 6  FOR PUBLICATION IN WEST’S HAWAII REPORTS AND PACIFIC REPORTER  not passed away, and voluminous documents and records have been destroyed or purged.” CMI acknowledged that this court, in dictum, “cited case law concerning whether laches bar legal claims, independent of the statute of limitations.” CMI was referring to Ass’n of Apartment Owners of Newtown Meadows v. Venture 15, Inc., 115 Hawaii 232, 284, 167 P.3d 225, 227 (2007). CMI also cited to 27A Am. Jur. 2d Equity § 117 (2014) for the following: “While some states without separate law and equity courts nevertheless hold laches inapplicable to legal actions, laches increasingly is applied to actions at law, such as actions seeking only damages.” CMI noted that law and equity have merged in Hawaii, as recognized in the Hawaii Rules of Civil Procedure (Rule 2 sets forth only “one form of action to be known as a ‘civil action.’”). According to CMI, in other jurisdictions where law and equity have merged, the defense of laches is applicable to legal claims as well as equitable claims. Specifically, CMI cited Bill v. Bd. of Educ. of Cicero School Dist. 99, 812 N.E.2d 604, 613 (Ill. App. 2004); Teamsters & Employers Welfare Trust of Ill. v. Gorman Bros. Ready Mix, 283 F.3d 877, 881 (7th Cir. 2002); Danjaq LLC v. Sony Corp., 263 F.3d 942, 955 (9th Cir. 2001); Telink, Inc. v. U.S., 24 F.3d 42, 45 (9th Cir. 1994); 7  FOR PUBLICATION IN WEST’S HAWAII REPORTS AND PACIFIC REPORTER  A.C. Aukerman Co. v. R.L. Chaides Constr. Co., 960 F.2d 1020, 1029 (Fed. Cir. 1992). Chaney Brooks joined in CMI’s MSJ. The AOAO’s memorandum in opposition counter-argued that the AOAO’s delay in bringing suit was not unreasonable, and that CMI’s unclean hands rendered its laches defense unavailable. The AOAO did not address CMI’s contention that laches is a defense at law and at equity. The circuit court granted CMI’s motion for summary judgment and Chaney Brooks’ joinder thereto. The circuit court later amended its order granting summary judgment solely to note that summary judgment was granted against the AOAO on all claims, in favor of all defendants. Relevant to this appeal, the circuit court concluded the following: 2. Hawaii recognizes laches as an affirmative defense. Hawaii Rules of Civil Procedure (HRCP) Rule 8(c). Laches applies to actions at law in states like Hawaii, which have merged law and equity courts. See HRCP Rule 1, Rule 2, Rule 8(c); Assoc. of Apt. Owners of Newtown Meadows v. Venture 15, Inc., 115 Hawaii 232, 284 (2007) (analyzing laches in an action in law). The circuit court concluded that the AOAO’s delay in bringing its lawsuit was unreasonable, as it knew that electricity was not being billed to the commercial tenants in 2001 or 2001 but waited 10 years to file its Complaint. The circuit court also concluded that the AOAO’s unreasonable delay caused severe and pervasive prejudice to the defendants due to evidentiary challenges, because Chaney Brooks had long since purged its 8  FOR PUBLICATION IN WEST’S HAWAII REPORTS AND PACIFIC REPORTER  Royal Aloha documents, there was no written agreement regarding submetered electricity billing, several critical witnesses had died in the interim, and those who remained did not remember details about the submetered electricity billing. The circuit court initially filed its Final Judgment on May 5, 2015, then its Amended Final Judgment in favor of all defendants against the AOAO on June 25, 2015. The AOAO timely appealed.