Cook v. The Association of Apartment Owners of Mt. Terrace

NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
30-SEP-2024
01:59 PM
Dkt. 76 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI#I

CHRISTINA D. COOK, BUBBY & YUKO LLC, E.J. TROSCLAIR,
YUKO DONLEY, KARI A. THOMPSON-STUEBER, AND
JEREMY E. CHELLIN, Plaintiffs-Appellants, v.
THE ASSOCIATION OF APARTMENT OWNERS OF MT. TERRACE,
Defendant-Appellee,
and
JOHN DOES 1-10; JANE DOES 1-10; DOE PARTNERSHIPS 1-10;
DOE CORPORATIONS 1-10; DOE ENTITIES 1-10; Defendants

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CIVIL NO. 1CC181000125)

SUMMARY DISPOSITION ORDER
(By: Wadsworth, Presiding Judge, and Nakasone, and McCullen, JJ.)

This appeal arises out of a dispute concerning the
repair and replacement of windows at the Mt. Terrace condominium
project in Hawai#i Kai, and the decision by the Board of
Directors for the Association of Apartment Owners of Mt. Terrace
(the Board) to treat the window project as a common expense to be
charged to unit owners. Plaintiffs-Appellants Christina D. Cook,
Bubby & Yuko, LLC, EJ Trosclair, Yuko Donley, Kari A. Thompson-
Stueber, and Jeremy E. Chellin (Plaintiffs) own units in Mt.
Terrace. They appeal from the July 31, 2020 Final Judgment,
entered in favor of Defendant-Appellee Association of Apartment
Owners of Mt. Terrace (the Association) and against Plaintiffs by
the Circuit Court of the First Circuit (Circuit Court).
Plaintiffs also challenge the following orders entered by the
Circuit Court:
NOT FOR PUBLICATION IN WEST'S HAWAII REPORTS OR THE PACIFIC REPORTER

(1) the October 25, 2018 "Order Denying Plaintiffs'
Motion for Partial Summary Judgment Regarding Plaintiffs['] Count
I (Declaratory Relief) of the Complaint, Filed on January 24,
2018, Filed on July 17, 2018";
(2) the October 25, 2018 "Order Granting
[Association's] Cross-Motion for Partial Summary Judgment on
Plaintiffs' Complaint, Filed on January 24, 2018, Filed on
August 13, 2018" (October 25, 2018 Order Granting Association's
XMPSJ);
(3) the February 27, 2020 "Order Granting
[Association's] Motion for Partial Summary Judgment on the Breach
of Fiduciary Duty Claim (Count III) in Plaintiffs' Complaint
Filed on January 24, 2018, Filed on November 21, 2019"; and
(4) the March 17, 2020 "Order Granting [Association's]
Motion for Partial Summary Judgment on Plaintiffs' Claims for
Declaratory and Injunctive Relief (Count I), Breach of Contract
(Count II), and Failure to Fund Reserves (Count IV) Filed on
January 3, 2020."1/
On appeal, Plaintiffs contend that the Circuit Court
erred in: (1) denying Plaintiffs' July 17, 2018 MPSJ, and
granting the Association's August 13, 2018 cross-motion for
partial summary judgment (August 13, 2018 XMPSJ), "because the
[c]ourt failed to properly apply the holding in Harrison v. Casa
De Emdeko[, Inc.]," 142 Hawai#i 218, 418 P.3d 559 (2018); (2)
granting the Association's November 21, 2019 MPSJ on Plaintiffs'
breach of fiduciary duty claim "because [the] legislature has
acknowledged that the relationship between an association and its
members is fiduciary in nature and that individuals are entitled
to seek relief from the court"; and (3) granting the
Association's January 3, 2020 MPSJ regarding Plaintiffs'
remaining claims "because [Hawaii Revised Statutes (HRS)] Chapter

1/
The Honorable Keith K. Hiraoka entered the October 25, 2018 order
denying Plaintiffs' July 17, 2018 motion for partial summary judgment
(July 17, 2018 MPSJ) and the October 25, 2018 Order Granting Association's
XMPSJ. The Honorable John M. Tonaki entered the February 27, 2020 order
granting the Association's November 21, 2019 motion for partial summary
judgment (November 21, 2019 MPSJ), the March 17, 2020 order granting the
Association's January 3, 2020 motion for partial summary judgment ( January 3,
2020 MPSJ), and the July 31, 2020 Final Judgment.

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514B provides Plaintiffs standing to bring contractual and
statutory claims against the [Association] for its failure to set
aside reserves."
After reviewing the record on appeal and the relevant
legal authorities, and giving due consideration to the issues
raised and the arguments advanced by the parties, we resolve
Plaintiffs' contentions as follows:
(1) Plaintiffs contend that the Circuit Court erred in
concluding that the "Mt. Terrace Declaration provides the
[Association] the authority to treat common elements the same as
limited common elements and in holding that the [Association] had
the authority to charge owners the cost of maintaining the
windows as a common expense."2/ Plaintiffs argue that the windows
are "limited common elements," and HRS § 514B-41(a) requires that
the expenses of maintaining limited common elements be charged to
the unit owners to which the limited common element is
appurtenant.
"Generally, the declaration and bylaws of a condominium
serve as a contract between the condominium owners and the
association, establishing the rules governing the condominium.
Harrison, 142 Hawai#i at 226, 418 P.3d at 567 (citing Ass'n of
Apartment Owners of Maalaea Kai, Inc. v. Stillson, 108 Hawai#i 2,
9, 116 P.3d 644, 651 (2005)). If the governing condominium
documents are unclear, the court looks to applicable statutory
provisions. Id. at 227, 418 P.3d at 568.
The Declaration of Horizontal Property Regime of Mt.
Terrace was recorded on March 23, 1972, and later restated. The
Third Restatement of Declaration of Horizontal Property Regime of
Mt. Terrace (the Declaration) was recorded on December 12, 1995.
On March 20, 2007, owners holding more than a majority of the
common interest in the Mt. Terrace condominium project approved
the Amendment to the Declaration of the Association of Apartment

2/
In the October 25, 2018 Order Granting Association's XMPSJ, the
Circuit Court concluded in relevant part: "As a matter of law, the expenses
related to common elements and limited common elements are treated as common
expenses under the Governing Documents, and therefore, the cost for the repair
and replacement of perimeter windows of the Mt. Terrace condominium building
are to be treated by the [Association] as common expense and charged to the
owners based on their percentage of common interest."

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Owners of Mt. Terrace (the Amendment). The Amendment, which was
recorded on April 10, 2007, added, among others, a new provision
stating, "This Project shall be governed by the provisions of
Hawai#i Revised Statutes Chapter 514B, as amended to the fullest
extent permitted by law."3/ See HRS § 514B-23 (2018) (permitting
an amendment to the governing documents "of any condominium
created before July 1, 2006 . . . to achieve any result permitted
by this chapter, regardless of what applicable law provided
before July 1, 2006" where the amendment is "adopted by the vote
or written consent of a majority of the unit owners").
The Declaration addresses the responsibility of unit
owners for common element expenses, but does not discuss who is
responsible for the expenses related to limited common elements.4/

3/
At an October 4, 2018 hearing on the parties' pending cross-
motions for partial summary judgment, the Association, when asked by the
Circuit Court, did not dispute that the Declaration was so amended in 2007.
4/
Paragraph B(3) states:
COMMON INTEREST. Each apartment shall have
appurtenant thereto an undivided percentage interest of
.793+ in all common elements of the Project (herein called
the "common interest") and the same proportionate share in
all common profits and expenses of the Project.

Paragraph H states:

COMMON EXPENSES. All charges, costs and expenses
whatsoever incurred by the Association for or in connection
with the administration of the Project, including without
limitation, the operation thereof, any maintenance, repair,
replacement and restoration of the common elements and any
additions and alterations thereto, any labor, services,
materials, supplies and equipment therefor, any liability
whatsoever for loss or damage arising out of or in
connection with the common elements or any accident, fire or
nuisance thereon, and any premiums for hazard and liability
insurance herein required with respect to the Project and
the cost of all utility services, including water,
electricity and gas, garbage disposal and any other similar
services unless separately metered shall constitute common
expenses of the Project for which all apartment owners shall
be severally liable in proportion to their respective common
interests. The Board shall from time to time assess the
common expenses against all the apartment owners in their
respective proportionate shares, and the unpaid amount of
such assessments against any apartment shall constitute a
lien against such apartment which may be foreclosed by the
Board or Managing Agent as provided by said Condominium
Property Act, provided that 30 days' prior written notice of
intention to foreclose shall be mailed, postage prepaid, to
the Trustees and all other persons having any interest in
(continued...)

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See Harrison, 142 Hawai#i at 227, 418 P.3d at 568 (reviewing
substantially similar language in a condominium declaration and
concluding that the declaration did not discuss who was
responsible for limited common element expenses). The
Restatement of By-Laws of the Association Of Apartment Owners Of
Mt. Terrace (By-Laws), recorded on April 10, 1992, are similarly
silent on this issue.
We therefore turn to the provisions of HRS Chapter
514B. HRS § 514B-41(a) (2018) states:

Common profits and expenses. (a) The common profits of the
property shall be distributed among, and the common expenses
shall be charged to, the unit owners, including the
developer, in proportion to the common interest appurtenant
to their respective units, except as otherwise provided in
the declaration or bylaws. In a mixed use project
containing units for both residential and nonresidential
use, the charges and distributions may be apportioned in a
fair and equitable manner as set forth in the declaration.
Except as otherwise provided in subsection (c) or the
declaration or bylaws, all limited common element costs and
expenses, including but not limited to maintenance, repair,
replacement, additions, and improvements, shall be charged
to the owner or owners of the unit or units to which the
limited common element is appurtenant in an equitable manner
as set forth in the declaration.

(Emphases added.) HRS § 514B-41(c) allows a condominium board to
adopt a resolution to assess certain limited common element
expenses based on the undivided common interest appurtenant to
each unit, if the board reasonably determines that the extra cost
to separately account and charge for the limited common element
expenses is not justified.
Here, neither the Declaration nor the By-Laws address
the responsibility for limited common element expenses (see
supra) and it does not appear that the Board adopted a resolution
under HRS § 514B-41(c). Thus, pursuant to HRS § 514B-41(a), if
the windows at issue are "limited common elements," expenses
related to their maintenance, repair, and replacement must be
charged to the individual unit owners to which the limited common
element is appurtenant. See Harrison, 142 Hawai#i at 227-28, 418

4/
(...continued)
such apartment as shown in the Association's record of ownership.
(Emphases added.)

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P.3d at 568-69 (construing substantially similar language in
predecessor statute, HRS § 514A-15(a) (2006)). The Circuit Court
therefore erred in concluding that it was not material whether
the windows were common elements or limited common elements –
that the Declaration treats related expenses as common expenses
and, therefore, the cost for the window project was to be treated
by the Association as a common expense and charged to the owners
based on their percentage of common interest. Accordingly, the
Circuit Court erred in granting the Association's August 13, 2018
XMPSJ.
However, to the extent Plaintiffs contend that the
windows should have been deemed limited common elements as a
matter of law, they are not correct. Reviewed de novo, the
record does not reflect, i.e., there were genuine issues of
material fact, whether the windows for which expenses were
incurred are common elements or limited common elements. The
Circuit Court did not err in denying Plaintiffs' July 17, 2018
MPSJ on the declaratory relief claim.
(2) Plaintiffs contend that the Circuit Court erred in
granting the Association's November 21, 2019 MPSJ on Plaintiffs'
breach of fiduciary duty claim. Relying in part on HRS §514B-
106, Plaintiffs argue that Hawai#i law recognizes that a
condominium association owes a fiduciary duty to its individual
members.
HRS §514B-106(a) (2018) provides that "officers and
members of the board shall owe the association a fiduciary duty
and exercise the degree of care and loyalty required of an
officer or director of a corporation organized under chapter
414D." (Emphasis added.) HRS §514B-106 does not support
Plaintiffs' argument that an association owes any individual
member a fiduciary duty.
Similarly, Hawai#i case law does not support
Plaintiffs' argument. See Ass'n of Apartment Owners of 2987
Kalakaua ex. rel. Bd. Of Dirs. v. Dubois, No. 27416, 2008 WL
3199461, at *1 (Haw. App. Aug. 7, 2008) (SDO) (affirming summary
judgment in favor of a condominium association where the
counterclaimant owner "failed to provide authority for his

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position that the Association itself, as opposed to individual
directors of the board, can be held responsible for a breach of
fiduciary duty" (citing HRS § 514B-106)). In particular, none of
the Hawai#i cases cited by Plaintiffs holds that a condominium
association owes a fiduciary duty to an individual member.
Accordingly, the Circuit Court did not err in granting
summary judgment in favor of the Association on Plaintiffs'
breach of fiduciary duty claim.
(3) Plaintiffs contend that the Circuit Court erred in
granting the Association's January 3, 2020 MPSJ on Plaintiffs'
remaining claims. Specifically, Plaintiffs contend that the
Circuit Court erred in concluding they lacked standing to pursue
their claims for declaratory and injunctive relief (Count I),
breach of contract (Count II), and failure to fund reserves
(Count IV), which were based on the Association's alleged
underfunding of the reserves for the window project.
In their Complaint, Plaintiffs alleged that the
Association failed to adequately fund the reserves for the repair
and maintenance of the windows, causing them individualized harm.
Plaintiffs further alleged that this failure constituted a breach
of the Association's contractual duties under the Mt. Terrace
governing documents, as well as a breach of the Association's
statutory duties under HRS § 514B-148, and that Plaintiffs
suffered resulting damages. In granting the Association's
January 3, 2020 MPSJ, the Circuit Court ruled that Plaintiffs
lacked standing to bring these claims because they had not
brought them as a derivative action.
In so ruling, the Circuit Court failed to recognize
that Plaintiffs were seeking redress for injury to them
individually. See Chambrella v. Rutledge, 69 Haw. 271, 283-84,
740 P.2d 1008, 1015 (1987)(although shareholders must bring
claims belonging to the corporation as a derivative action, they
may bring individual claims seeking redress for injury to them
individually); see also HRS § 514B-148 (2018) (mandating the
association's assessment of adequate replacement reserves and
providing that "[s]ubject to the procedures of section 514B-157 .
. . , any unit owner whose association board fails to comply with

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this section may enforce compliance by the board.").
On this record, the Association did not establish as a
matter of law that Plaintiffs lacked standing to assert their
claims based on the Association's alleged failure to adequately
fund the reserves for the repair and maintenance of the windows.
Accordingly, the Circuit Court erred in granting the
Association's January 3, 2020 MPSJ on Plaintiffs' claims for
declaratory and injunctive relief, breach of contract, and
failure to fund reserves.
For the reasons discussed above, we affirm in part and
vacate in part the July 31, 2020 Final Judgment, entered by the
Circuit Court of the First Circuit. The Final Judgment is
affirmed to the extent the Circuit Court entered judgment in
favor of Defendant-Appellee Association and against Plaintiffs-
Appellants on their claim for breach of fiduciary duty (Count
III). The Final Judgment is vacated to the extent the Circuit
Court entered judgment in favor of Defendant-Appellee Association
and against Plaintiffs-Appellants on their claims for declaratory
and injunctive relief (Count I), breach of contract (Count II),
and failure to fund reserves (Count IV). The case is remanded to
the Circuit Court for further proceedings consistent with this
opinion.

DATED: Honolulu, Hawai#i, September 30, 2024.

On the briefs:
/s/ Clyde J. Wadsworth
Terrance M. Revere and Presiding Judge
Amanda L. Dutcher
(Revere & Associates)
for Plaintiffs-Appellants. /s/ Karen T. Nakasone
Associate Judge
Matt A. Tsukazaki and
Tyler A. Tsukazaki
(Li & Tsukazaki) /s/ Sonja M.P. McCullen
for Defendant-Appellee. Associate Judge

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