Queen Emma Foundation v. Tatibouet

bNLiBHARY

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

IN THE INTERMEDIATE COURT OF APPEALS

oF THE sTATE oF HAwArI

---o0o--- ma

§§

THE QUEEN EMMA FoUNDATIoN, §§ W”

a HawaiH.non-profit corporation, §§ §§

Plaintiff-Appellee, v ?“

vs. kw “`

ANDRE STEPHEN TATIBOUET, and CORAL REEF DEVELOPMENl LLCF§ §

a HawaiYi limited company, §§

Defendants~Appellants, ' ;HW §§

and

JOHN DOES 1-l0; JANE DOES 1-l0; DOE ENTITIES 1-lO;

and DOE GOVERNMENTAL ENTITIES 1-lO,

Defendants

NO. 26764

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT

(CIVIL NO. 03-1-lO54)

Ju1y 29, 2010

NAKAMURA, cH1EF JUDGE, FoLEY} and FUJIsE, JJ.

OPINION OF THE COURT BY NAKAMURA, C.J.

In this appeal, we are called upon to determine whether

(l) an otherwise moot controversy may be kept alive by a dispute

over the award of attorneys' fees and costs; and (2) whether the

underlying merits of a moot appeal must be addressed to determine

fees and costs to

(l) a dispute

whether the trial court's award of attorneys'

the "prevailing party" was proper. we hold that

over the award of attorneys' fees and costs does not prolong the

life of an otherwise moot controversy; and (2) while an appellate

court does have jurisdiction to consider whether the award of

attorneys' fees and costs was proper, the merits of the underlying

moot controversy will not be considered in determining whether the

recipient of the attorneys' fees and costs award was the

"prevailing party."

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

This appeal stems from a complaint for declaratory

judgment filed in the Circuit Court of the First Circuit (circuit

court)y by Plaintiff-Appellee The Queen Emma Foundation (The

Foundation) against Defendants-Appellants Andre Stephen Tatibouet

(Tatibouet) and Coral Reef Development, LLC (Coral Reef

Development) (collectively referred to as "Defendants"). Through

its complaint, The Foundation sought a judgment "declaring that

Defendants are not entitled to convert the Coral Reef Hotel into a

condominium . . . ." The Foundation's complaint and request for

relief turned on the interpretation of a lease, referred to herein

as "the Lot 30-A Amended Lease," which covered property owned by

The Foundation on which the Coral Reef Hotel was situated. The

Foundation was the "LESSOR" under the Lot 30-A Amended Lease and

Tatibouet held the position of a "LESSEE." The circuit court

granted The Foundation's complaint for declaratory judgment and

also awarded attorneys' fees and costs in favor of The Foundation

as the prevailing party in the total amount of $534,708.73.

The Defendants appealed these decisions. Tatibouet

subsequently paid the attorneys' fees and costs award plus accrued

interest. Defendants filed an opening brief, arguing that the

circuit court erred in granting declaratory relief to The

Foundation. They also argued that the circuit court erred in

awarding The Foundation attorney's fees and costs because The

Foundation "should not be the prevailing party."

Shortly after Defendants filed their opening brief,

Tatibouet filed for bankruptcy. Tatibouet's bankruptcy filing

automatically stayed this appeal. The proceedings in this appeal

were suspended for three years while Tatibouet's bankruptcy

proceeding was being resolved. During the bankruptcy proceeding,

Tatibouet assigned and conveyed his interest in the Lot 30-A

Amended Lease to a third party. In addition, Coral Reef

Development was administratively terminated by the Department of

i/ The Honorable victoria S. Marks presided.

2

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

Commerce and Consumer Affairs (DCCA) for failure to file annual

reports and pay required fees.

On March 5, 2008, this court ordered Tatibouet to file a

report on the status of his bankruptcy proceeding, On April 8,

2008, Tatibouet responded that he received a discharge under the

bankruptcy code in October 2007 and that a Final Decree had been

entered. Tatibouet stated that as the result of the termination

of his bankruptcy case, the automatic stay of this appeal was no

longer in effect, and he requested that proceedings in this appeal

be resumed.

The Foundation subsequently filed a motion to dismiss on

the ground that this appeal is moot. The Foundation asserts that

Tatibouet and Coral Reef Development no longer have an interest in

the Lot 30-A Amended Lease or the Coral Reef Hotel, and they thus

have no "'right' or ability to complete their leasehold

condominiumization scheme," which forms the basis of the

underlying dispute. The Foundation argues that for this court to

render a decision on the circuit court's interpretation of the Lot

30~A Amended Lease "would be the equivalent of an advisory opinion

on an abstract point of law."

In opposition, Defendants claim that this appeal is not

moot because (l) Tatibouet still has a direct financial stake in

the appeal since he seeks to vacate the award of attorneys' fees

and costs against him; and (2) Tatibouet may file a future action

against The Foundation for breach of the Lot 30-A Amended Lease.

Defendants also contend that we must address the underlying merits

of this appeal, specifically, the proper interpretation of the Lot

30-A Amended Lease, because they are attacking the award of

attorneys' fees and costs on the ground that Tatibouet, and not

The Foundation, should have been the prevailing party.

For the reasons discussed below, we conclude that: (l)

the Defendants' claims challenging the merits of the circuit

court's grant of declaratory relief are moot; (2) Tatibouet's

interest in overturning the attorneys' fees and costs award and

the possibility that he may seek to file a lawsuit for breach of

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

the Lot 30-A Amended Lease do not save his claims challenging the

merits of the circuit court's grant of declaratory relief from

being moot; and (3) without our reaching the merits of the circuit

court's grant of declaratory relief, the circuit court's award of

attorneys' fees should be affirmed.

I. BACKGROUND FACTS

A.

The subject hotel, formerly known as the Coral Reef

Hotel (Hotel), is located on a lot described as Lot 30-A in

Waikiki. Lot 30~A was once part of a larger parcel described as

Lot 30. In l965, Lot 30 was owned by The Foundation's predecessor

in titleW and was leased to Waikiki Development Company (WDC).

WDC, in turn, subleased Lot 30 to a third party, and the sublease

was thereafter assigned to additional parties in separate

transactions. In 1969, the Hotel was built, and in l972,

Tatibouet and others purchased the Hotel and a portion of the

underlying leasehold of Lot 30 containing the Hotel, Lot 30 was

later subdivided into two lots, with Lot 30-A being the lot

containing the Hotel,

In September and December 1975 and February 1976, an

amended lease for Lot 30-A, the Lot 30-A Amended Lease, was

executed with the term of the lease running until 2050. The

Foundation was the "LESSOR" and Tatibouet was one of the

"SUBLESSEES" when the Lot 30~A Amended Lease was signed. Later in

1976, Tatibouet and others acquired the position of the "LESSEE"

under the Lot 30-A Amended Lease.

Article IX of the Lot 30-A Amended Lease provides in

pertinent part:

ARTIcLE ix

CONDOMINIUM DEVELOPMENT

IT IS MUTUALLY COVENANTED AND AGREED by and between the

parties hereto that LESSEE may with the written approval of

W In l965, The Foundation's predecessor in title was The Queen's

Hospital, which was later renamed The Queen's Medical Center. For purposes of

simplicity, we will use "The Foundation“ when referring to any of its

predecessors in title for Lot 30 or Lot 30-A.

4

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

LESSOR develop the demised premises into a residential or

commercial condominium upon the following terms and

conditions:

2. Horizontal Property Regime. If LESSEE shall

decide to develop or convert the premises on Lot 30A into a

condominium development, then at LESSEE's request and

expense, LESSOR will join with LESSEE in executing a suitable

declaration submitting said premises to a Horizontal Property

Regime by Chanter 514, Hawaii Revised Statutes, as now or

hereafter amended, thereby creating condominium leasehold or

subleasehold estates in each of the units and all common

elements of the project constructed thereon. Such

declaration and all condominium documents shall be subject to

the written approval of the attorneys for LESSOR. The

schedule of rents shall be subject to approval of LESSOR.

Such condominium documents will provide for an association of

unit owners who shall at all times maintain a responsible

corporate managing agent approved by LESSOR for the

management and operation of said project and for the

collection and payment when due on behalf of the holders of

the unit subleased, all rents, taxes and other charges

thereunder.

Any proposed condominium subdivision shall be for a

period no longer than this lease and shall not be an

encumbrance upon the fee simple title.

(Emphases added.)

In 2003, Tatibouet moved forward with plans to convert

the Hotel into a condominium, and Coral Reef Development was

formed. Coral Reef Development was the proposed developer for

converting the Hotel into a condominium, and Tatibouet planned to

assign all of his interest in the Hotel to Coral Reef Development.

In March of 2003, without seeking or obtaining The Foundation's

approval for the condominium conversion, Defendants submitted a

Preliminary Public Report and a Declaration of Condominium

Property RegimeW of Coral Reef Condominium Project to the Hawaii

Real Estate Commission. On May 6, 2003, The Foundation learned of

Tatibouet's plans to convert the Hotel into a condominium through

a newspaper article. On May 10, 2003, condominium units weren

offered for sale to the public.

W Condominiums were previously referred to in the Hawaii Revised

Statutes as "horizontal property regimes," but the HawaFi Legislature changed

the terminology to "condominium property regime" in 1988. 1988 Haw. Sess.

Laws Act 65 § 2.

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

On May 19, 2003, The Foundation filed its complaint for

declaratory judgment in the circuit court seeking a declaration

that Defendants were not entitled to convert the Hotel into a

condominium. The dispute between the parties largely turned on

the interpretation of Article IX of the Lot 30-A Amended Lease.

The circuit court interpreted Article IX to mean "that

[T]he Foundation would take steps to facilitate establishing a

condominium provided that the condominium would not extend beyond

the term of the lease and provided that the condominium would not

encumber [T]he Foundation's fee simple title."' The circuit court

concluded that "[u]nder current law, a condominium cannot be

created on Lot 30-A without encumbering [T]he Foundation's fee

simple title."F Accordingly, the circuit court granted The

Foundation's complaint for declaratory judgment and ordered that

Defendant's [sic] are not entitled to convert the Coral

Reef Hotel into a condominium and that all offerings,

marketing, filings and submission to the Real Estate

Commission and the general public concerning such

purported conversion are not binding upon [T]he

Foundation and are of no effect.

The Foundation subsequently filed a motion for recovery

of its attorneys' fees and costs on the grounds that: (l) The

Foundation was the prevailing party; and (2) under the terms of

the Lot 30-A Amended Lease and Hawaii Revised Statutes (HRS)

§ 607-14 (Supp. 2009), The Foundation was entitled to recover the

attorneys' fees and costs it incurred. The circuit court granted

The Foundation's motion but reduced the amount of attorney's fees

it had requested. As part of its Final Judgment, the circuit

court entered judgment in favor of The Foundation and jointly and

severally against Defendants for attorneys' fees of $489,304.5l

and costs of $45,404.22, for a total of $534,708.73. Tatibouet

9 With respect to Coral Reef Development, the circuit court further

concluded that: (l) Tatibouet was required to obtain The Foundation's approval

and/or consent to assign his interest in Lot 30-A to another entity such as

Coral Reef Development; and (2) Tatibouet had not assigned any interest in Lot

30-A to Coral Reef Development, and Coral Reef Development was not the

"LESSEE" and did not have the rights of the "LESSEE" under the Lot 30~A

Amended Lease.

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

paid the judgment for attorney's fees and costs plus accrued

interest.W 3

B.

Defendants filed a notice of appeal from the circuit

court's: (l) "Final Judgment"; (2) "Findings of Fact, Conclusions

of Law and Order," which granted The Foundation's complaint for

declaratory judgment; (3) "Order Granting The Queen Emma

Foundation's Motion for Recovery of Attorney's Fees and Costs";

(4) "Order Denying Defendants' Motion to Alter or Amend the

Findings of Fact, Conclusions of Law and Order"; and 5) "Order

Denying Defendants Andre Stephen Tatibouet's and Coral Reef

Development, LLC's Motion for Summary Judgment . . ."

In their opening brief, Defendants argue that the

circuit court erred in granting The Foundation's complaint for

declaratory judgment, and they challenge numerous findings of fact

and conclusions of law issued by the circuit court in support of

its decision. Defendants also argue that the circuit court erred

in awarding attorney's fees and costs to The Foundation because

The Foundation should not have been the prevailing party. In

addition, Defendants assert that the circuit court erred in: (l)

permitting the introduction of expert testimony on questions of

law; (2) denying Defendants' motion to alter or amend the

"Findings of Fact, Conclusions of Law and Order," which granted

The Foundation's complaint for declaratory judgment; and (3)

denying Defendants' motion for summary judgment,

After Defendants filed their opening brief and before

The Foundation's answering brief was due, Tatibouet filed for

bankruptcy, which automatically stayed this appeal. As a result

of the automatic stay, this appeal lay dormant for three years.W

As part of the bankruptcy proceeding, Taitbouet assigned and

9 Tatibouet asserts that he paid the judgment for attorney's fees and

costs because he could not afford a supersedeas bond and because The

Foundation took the position that non-payment would constitute a breach of the

Lot 30-A Amended Lease.

y There is no indication that Tatibouet attempted to seek relief from

the bankruptcy stay to pursue this appeal.

7

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

conveyed his interest in the Lot 30-A Amended Lease to a third

party. In addition, on December 7, 2007, Coral Reef Development

was administratively terminated by the DCCA for failure to file

annual reports and pay required fees. This appeal resumed after

Defendants notified this court in 2008 that a Final Decree had

been entered in Tatibouet's bankruptcy proceeding.

II. STANDARDS OF REVIEW

A. Mootness

Courts "may not decide moot questions or abstract

propositions of law." Life of the Land v. Burns, 59 Haw. 244,

250, 580 P.2d 405, 409 (l978) (citation and internal quotation

marks omitted). "It is axiomatic that mootness is an issue of

subject matter jurisdiction. Whether a court possesses subject

matter jurisdiction is a question of law reviewable de novo."

Hamilton v. Lethem, 119 Hawafi 1, 4-5, 193 P.3d 839, 842-43

(2008) (citation and internal quotation marks omitted).

B. Attorney's Fees and Costs

"The trial court's grant or denial of attorneys' fees

and costs is reviewed under the abuse of discretion standard."

Kamaka v. Goodsill Anderson Quinn & Stifel, 117 HawaiH.92, 105,

176 P.3d 91, 104 (2008) (citation, internal quotation marks, and

brackets omitted).

III. DISCUSSION

A. Mootness

We first address the argument raised by The Foundation

in its motion to dismiss this appeal and in its answering brief

that the mootness doctrine bars our consideration of Defendants'

claims.

l.

In general, "this court does not have jurisdiction to

decide abstract propositions of law or moot cases." Lathrop v.

Sakatani, 111 Hawafi 307, 312, 141 P.3d 480, 485 (2006)

(citation, internal quotation marks, and brackets omitted). "A

case is moot where the question to be determined is abstract and

8

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

does not rest on existing facts or rights." In re ADDlication of

ThOmaS, 73 HaW. 223, 226, 832 P.2d 253, 254 (l992).

A case is moot if it has lost its character as a

present, live controversy of the kind that must exist if

courts are to avoid advisory opinions on abstract

propositions of law. The rule is one of the prudential rules

of judicial self-governance founded in concern about the

proper -- and properly limited -- role of the courts in a

democratic society. We have said the suit must remain alive

throughout the course of litigation to the moment of final

appellate disposition to escape the mootness bar.

Kona Old Hawaiian Trails Group v. Lyman, 69 Haw. 81, 87, 734 P.2d

161, 165 (1987) (citations, internal quotation marks, and brackets

omitted).

The mootness doctrine is said to encompass the

circumstances that destroy the justiciability of a suit

previously suitable for determination. Put another way, the

suit must remain alive throughout the course of litigation to

the moment of final appellate disposition. Its chief purpose

is to assure that the adversary system, once set in

operation, remains properly fueled. The doctrine seems

appropriate where events subsequent to the judgment of the

trial court have so affected the relations between the

parties that the two conditions for justiciability relevant

on appeal -- adverse interest and effective remedy -- have

been compromised.

Lathrop, 111 HawaiH.at 312-13, 141 P.3d at 485-86 (citations and

block quote format omitted).

The Foundation contends that Defendants' appeal has been

rendered moot by the transfer of Tatibouet's interest in the Lot

30-A Amended Lease and the Hotel to a third party during

Tatibouet's bankruptcy proceeding and by the administrative

termination of Coral Reef Development. In support of its motion

to dismiss on mootness grounds, The Foundation submitted the

following documents:

1. A "Notice of Payment Defaults and Other Material

Defaults" (Default Notice) filed on December 7, 2006, in

Tatibouet's bankruptcy proceeding, which stated that as the result

of Tatibouet's default on a loan agreement, "title to [the Hotel]

and [Tatibouet's] interest in the ground lease thereto shall be

conveyed" to a third party.W

F The Default Notice provided that the conveyance shall take place

"without the need of a further order" of the bankruptcy court, unless

(continued...)

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

2. An "Assignment of Lease" dated December 21, 2006,

filed in the Office of the Assistant Registrar of the Land Court,

State of Hawafi, in which Tatibouet assigned and conveyed his

interest in the Lot 30-A Amended Lease to a third party.

3. A "Certificate of Administrative Termination"

issued by the DCCA, dated December 7, 2007, which states that

Coral Reef Development was administratively terminated for failure

to file annual reports and pay required fees.W

The Foundation argues that based on the events

established by these documents, "it is undisputed that

[Defendants] have no current interest whatsoever" in the Lot 30-A

Amended Lease and the Hotel. The Foundation accordingly asserts

that Defendants "no longer have any putative 'right' or ability to

complete their leasehold condominiumization scheme," In sum, The

Foundation argues that the appeal is moot because a decision by

this court on the circuit court's interpretation of the Lot 30-A

Amended Lease "would equate to an advisory opinion on an abstract

point of law."

Defendants do not dispute that Tatibouet has assigned

and conveyed his interest in the Lot 30-A Amended Lease and the

Hotel to a third-party. Nor do they dispute that Coral Reef

Development has been administratively terminated. However,

Defendants argue that the appeal is not moot because (1) Tatibouet

has a direct financial stake in the appeal since he is challenging

the circuit court's award of attorneys' fees and costs, and he is

F(...continued)

Tatibouet or the creditors committee filed a motion contesting the default and

the bankruptcy court entered an order finding that no material default had

occurred. ‘

9 Defendants acknowledge, and we agree, that "on motions related to

mootnesss, the appellate court may consider matters outside the record

. . . ." This proposition is supported by case authority. §§§, e.g.,

Anderson v. Cain, 27 Haw. 415, 419 (Haw. Terr. 1923) (concluding that facts

that do not appear on the record, but which show that an appeal has been

rendered moot, "may be proved by extrinsic evidence"); Iowa Mut. Ins. Co. v.

McCarthy, 572 N.W.2d 537, 540 n.1 (Iowa 1997); State ex rel. Nelson v. Russo,

729 N.E.2d 1181, 1182 (Ohio 2000). Defendants do not challenge the accuracy

of the documents submitted by The Foundation. we therefore consider these

documents in determining whether the claims raised by Defendants in this

appeal are moot.

10

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

challenging the circuit court's award on the basis that The

Foundation should not have been the prevailing party; and (2)

Tatibouet may file an action against The Foundation for breach of

the Lot 30-A Amended Lease, which Tatibouet claims he cannot do

unless the circuit court's judgment granting declaratory relief is

vacated.

2.

We conclude that events occurring after the circuit

court's entry of its Final Judgment have rendered Defendants'

challenge to the circuit court's grant of declaratory relief moot.

As noted, Tatibouet does not dispute that he has transferred his

interest in the Lot 30-A Amended Lease and the Hotel and to a

third party or that Coral Reef Development has been

administratively terminated. Therefore, the controversy

underlying The Foundation's complaint for declaratory judgment and

the circuit court's grant of declaratory relief -- whether

Defendants are entitled to convert the Hotel into a condominium

under the Lot 30-A Amended Lease -- is no longer a presentj live

controversy.

Because Defendants no longer have an interest in the Lot

30-A Amended Lease, they do not have a present adverse interest

vis-a-vis The Foundation with respect to the interpretation of the

Lot 30-A Amended Lease. A decision by this court overturning the

circuit court's grant of declaratory relief on the merits would

not provide Defendants with an effective remedy regarding their

dispute with the Foundation over their entitlement under the Lot

30-A Amended Lease to convert the Hotel into a condominium. Even

if we were to adopt Defendants' interpretation of the Lot 30-A

Amended Lease, they no longer have the ability to carry out their

plans to convert the Hotel into a condominium. Thus, a decision

by this court on the merits of the circuit court's interpretation

of the Lot 30-A Amended Lease and the circuit court's grant of

declaratory relief would be an advisory opinion on abstract

propositions of law. §§§ Lathrop, 111 Hawafi at 312, 141 P.3d at

485 ("Courts will not consume time deciding abstract propositions

of law or moot cases, and have no jurisdiction to do so." (quoting

ll

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

wong v. Bd. of Regem;s, Univ. of Hawai‘i, 62 Haw. 391, 395, 616

P.2d 201, 204 (1980)).

3.

Tatibouet contends that his challenge to the circuit

court's grant of declaratory relief is not moot because he may

bring a damages claim against The Foundation for breach of the Lot

30-A Amended Lease. Tatibouet asserts that unless the circuit

court's declaratory judgment is vacated, his damages claim will be

barred by "issue preclusion" arising from the circuit court's

declaratory judgment.W We conclude that the possibility that

Tatibouet may file a damages claim is too speculative and remote

to save his challenge to the circuit court's grant of declaratory

judgment from being moot, especially since he may not have the

right to bring such a claim by virtue of his bankruptcy

proceeding.

In their opposition to The Foundation's motion to

dismiss on mootness grounds, Defendants initially asserted that

Tatibouet only assigned his interest in the Lot 30-A Amended Lease

and did not assign or transfer the damages claim to anyone else.

However, Defendants later filed an "errata" in which they advised

this court that the assertion that Tatibouet did not assign or

transfer his damages claim "may be incorrect." Defendants stated

that their review of certain documents "indicates that claims

‘relating to the Real Property' (defined as the land under the

[H]otel) may have been assigned." Defendants also stated that

they were reviewing additional documents "to determine the nature

and extent of any such assignment" and requested leave "to file a

supplemental memorandum on the effect of any such assignment on

the instant appeal." Defendants did not thereafter identify or

y As the basis for his "issue preclusion" argument, Tatibouet cites

Hawaii Revised Statutes (HRS) § 632-3 (1993), which provides:

Further relief upon judgment, Further relief based on a

declaratory judgment may be granted whenever necessary or proper,

after reasonable notice and hearing, against any adverse party

whose rights have been adjudicated by the judgment,

12

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

provide this court with any supplemental information on this

issue.

In addition, as the result of Tatibouet's bankruptcy

filing, any damages claim that might be asserted may properly

belong to Tatibouet's bankruptcy estate. virtually all of a

debtor's assets, including causes of action that belong to the

debtor at the commencement of a bankruptcy case, vest in the

bankruptcy estate upon the filing of a bankruptcy petition. 11

U.S.C. § 541(a)(1) (2006); Turner v. COOk, 362 F.3d 1219, 1225-26

(9th Cir. 2004) (concluding that when the debtor declared

bankruptcy, all the debtor's legal or equitable interests in his

property, including causes of action, "became the property of the

bankruptcy estate and are represented by the bankruptcy trustee").

In support of its motion to dismiss, The Foundation

submitted the "Debtor's Schedules, Statement of Financial Affairs,

and Amended Mailing Matrix" (Debtor's Schedules) filed by

Tatibouet in his bankruptcy case.lW The Debtor's Schedules filed

by Tatibouet did not identify an affirmative claim or cause of

action against The Foundation for damages or breach of the

Lot 30-A Amended Lease. In response to The Foundation'sA

submissions, Defendants did not proffer evidence that the

bankruptcy trustee had abandoned any such claim or cause of

action.¥/ If Tatibouet's purported cause of action for damages

against The Foundation was not scheduled or abandoned in

iW As noted in footnote 8, supra, we may consider matters outside the

record in determining whether a claim raised on appeal has been rendered moot.

In addition, we have the discretion, which we exercise here, to take judicial

notice of documents filed in Tatibouet's bankruptcy case, §§§ Hawaii Rules

of Evidence Rule 201 (1993); Roxas v. Marcos, 89 Hawafi 91, 111 n.9, 969 P.2d

1209, 1229 n.9 (1998) (stating that "[c]ourts . . . may, in appropriate

circumstances, take notice of proceedings in other courts, both within and

without their judicial system[,] if those proceedings have a direct relation

to the matter at issue" (citation omitted) (brackets in original)); Onaka v.

Onaka, 112 Hawafi 374, 386 n.15, 146 P.3d 89, 101 n.15 (2006) (taking

judicial notice on appeal of the record in a related bankruptcy case).

59 By order dated June 12, 2008, this court denied The Foundation's

motion to supplement the record with exhibits relating to The Foundation‘s

mootness argument, but ruled that we may consider such exhibits in deciding

The Foundation's motion to dismiss on mootness grounds. we also ruled that

Defendants may submit relevant evidence responding to The Foundation's

exhibits.

13

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

Tatibouet's bankruptcy case, then it is still property of the

bankruptcy estate, and the bankruptcy trustee may reopen

Tatibouet's bankruptcy case to administer this asset on behalf of

the creditors. 11 U.S.C. §§ 350(b) and 554 (2006); Cusano v.

Klein, 264 P.3d 936, 945-46 (9th Cir. 2001) (stating that "[i]f

[the debtor] failed properly to schedule an asset, including a

cause of action, that asset continues to belong to the bankruptcy

estate and did not revert to [the debtor]"); In re Lopez, 283 B.R.

22, 28 (B.A.P. 9th Cir. 2002) (granting a motion to reopen a case

in which the debtor failed to disclose a cause of action in her

schedules, noting that "property that is neither abandoned nor

administered remains property of the estate even after the case is

closed").

Tatibouet has not shown, in light of his bankruptcy

proceeding, that he has the right to bring a claim for damages

against The Foundation for breach of the Lot 30-A Amended Lease.

Given the speculative and remote nature of Tatibouet's purported

damages claim, the possibility that Tatibouet may seek to assert a

damages claim is insufficient to save his challenge to the circuit

court's grant of declaratory judgment from being moot.

4.

Tatibouet argues that his challenge to the circuit

court's award of attorney's fees and costs on the ground that he,

and not The Foundation, should have been the prevailing party

saves the underlying controversy over whether the Lot 30-A Amended

Lease entitled Defendants to convert the Hotel into a condominium

from being moot. We disagree.

Hawafi has not addressed the specific question of

whether a claim for attorneys' fees and costs keeps alive an

otherwise moot controversy. However, courts from other

jurisdictions that have considered this question, including the

United States Supreme Court, have concluded that a dispute over

attorney's fees and costs does not permit adjudication of an

otherwise moot controversy. See, e.g., Lewis v. Continental Bank

Corp., 494 U.S. 472, 480 (1990) (holding that an interest in

attorneys' fees is not enough to create an Article III case or

14

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

controversy when the underlying case is moot); Center for

Biological Diversity v. Marina Point Development Co., 566 F.3d

794, 805-06 (9th Cir. 2009) (lead opinion) (citing numerous cases

in support of the proposition that when a matter becomes moot, an

appellate court cannot review the merits of the underlying dispute

to determine whether an attorneys' fees award was proper); Ott v.

Boston Edison Co., 602 N.E.2d 566, 568 (Mass. 1992) ("A potential

claim for attorneys' fees standing alone does not justify deciding

a moot case."); Dept. of Education v. Rodarte, 127 F.Supp.2d 1103,

1113-14 (D. Haw. 2000) (holding that the pending question

regarding the propriety of an attorneys' fees and costs award for

the prevailing party in an appeal from an administrative decision

did not save the underlying dispute from being moot).

we agree with these cases and conclude that Defendants'

appeal of the circuit court's award of attorneys' fees and costs

does not save the underlying controversy over whether the Lot 30-A

Amended Lease entitled Defendants to convert the Hotel into a

condominium from being moot. Accordingly, we dismiss as moot

Defendants' claims on appeal that challenge the circuit court's

grant of declaratory judgment in favor of The Foundation. For the

same reasons, we also dismiss as moot Defendants' claim on appeal

that the circuit court erred in denying their motion for summary

judgment,

B. Attorneys' Fees and Costs

The question then becomes how should we resolve

Defendants' appeal of the attorneys' fees costs award. we adopt

the approach of the courts that have concluded that "[a]lthough a

claim for attorney's fees does not preserve a case which has

otherwise become moot on appeal, . . . the question of attorney's

fees is ancillary to the underlying action and survives

independently under the Court's equitable jurisdiction."i United

States v. Ford, 650 F.2d 1141, 1144 (9th Cir. 1981); see Bishop v.

Committee on Professional Ethics and Conduct of the Iowa State

_B_a_];, 686 F.2d l278, 1290 (1982); Rodarte, 127 F.Supp.Zd at 1115-

17. where the underlying controversy has become moot, "there is

no right to review or redetermine any of the issues in the

15

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

underlying action solely for the purpose of deciding the

attorney's fees question." §p;Q, 650 F.2d at 1144 n.1. Instead,

the question of attorney's fees and costs must be decided based on

whether the recipient of the attorney's fees and costs award can

be considered to be the prevailing party in the underlying action,

"without regard to whether we think the [trial] court's decision

on the underlying merits is correct." Bishop, 686 F.2d at 1290;

see BagbV v. Beal, 606 F.2d 411, 414-15 (3d. Cir. 1979). we have

jurisdiction, under this approach, to decide Defendants' challenge

to the circuit court's award of attorney's fees and costs,

The court in Rodarte confronted a situation analogous to

the one we face in the instant appeal. Rodarte involved an

administrative hearing decision in favor of a disabled student and

her mother (collectively, the "student") and against the HawaiH_

State Department of Education (DOE) on a claim brought by the

student under the Individuals with Disabilities in Education Act.

Rodarte, 127 F.Supp.2d at 1104-08. The DOE appealed to the

federal district court from the adverse administrative hearing

decision, and the student sought attorney's fees and costs as the

prevailing party in the administrative hearing, Id. at 1107. The

district court found that the DOE's appeal of the administrative

hearing decision was moot because the student had already received

the compensatory education ordered by the hearing officer and had

graduated from high school. ldp at 1111-12. At issue, then, was

how the mootness of the DOE's appeal affected the attorneys' fees

and costs analysis. In other words, whether the court was

required, despite the mootness of the DOE's appeal, to decide if

the student should have been the prevailing party. ;Qp at 1115.

The court noted that as a general rule, an appellee is

no longer a "prevailing party" and must return attorneys' fees

awarded when the appellee loses on the merits on appeal (i.e., "a

favorable judgment on the merits in a lower proceeding is reversed

on appeal"). ;d; However, the court concluded that it was not

required to decide the merits of the moot appeal solely for the

purpose of determining if the student should be the prevailing

party with respect to the attorneys' fees award. Id. The court

16

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

asserted that it "can find no case stating that if an appeal is

moot, a court is nevertheless obliged to investigate the merits in

order to determine who should have been the prevailing party for

purposes of allocating attorneys' fees." ;Qp On the other hand,

the court cited several precedents supporting the view that when

an appeal is moot, the court should not inquire into the

correctness of the underlying decision, but should look to the

outcome of the litigation in determining whether a party was the

prevailing party. ;dp at 1115-16.

Based on its survey of the relevant precedents, the

court found that "it need not determine who the prevailing party

would be in the instant case had the appeal not been moot.

Instead it will simply analyze whether [the student] meets the

test for a 'prevailing party' based on the outcome of the

administrative hearing." ;Qp at 1116. The court concluded that

the student was the prevailing party in that the student succeeded

on a significant issue in the litigation which modified the DOE's

behavior in the studentls favor. lQp at 1117. The court

therefore granted the student's motion for summary judgment for,

attorney's fees and costs. ;Q4

As in Rodarte, we examine whether The Foundation was the

"prevailing party" based on the outcome of the circuit court

proceedings and without inquiring into the correctness of the

circuit court's grant of declaratory judgment on the merits. In

general, a prevailing party is a party who has "prevail{ed] on the

disputed main issue, even though not to the extent of [the

party's] original contention . . . ."' Food Pantry, Ltd. v.

Waikiki Business Plaza, Inc., 58 Haw. 606, 620, 575 P.2d 869, 879

(1978); see Kamaka, 117 Hawafi at 126, 176 P.3d at 125 (stating

that "for purposes of HRS § 607~14 [(the statute cited by The

Foundation in support of its request for attorneys' fees)], the

party in whose favor judgment was entered is the prevailing

party").

Here, based on the outcome of the circuit court

proceedings, it is clear that The Foundation was the prevailing

party. The Foundation sought a declaratory judgment, based on its

17

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

interpretation of the Lot 30-A Amended Lease, that "Defendants are

not entitled to convert the Coral Reef Hotel into a condominium."

The purpose of the litigation was to prevent Defendants from going

forward with their plans to convert the Hotel into a condominium.

The circuit court granted The Foundation's complaint for

declaratory judgment, which effectively stopped Defendants from

continuing with their plans. viewing the outcome of the circuit

court proceedings without considering the underlying merits of the

lcircuit court's decision, we conclude that The Foundation was the

prevailing party and affirm the circuit court's award of

attorneys' fees and costs. See Rodarte, 127 F.Supp.2d at 1114-17;

Center For Biological Diversity, 566 F.3d at 805-06 (lead

opinion).¥/

lV. CONCLUSlON

For the foregoing reasons, we dismiss as moot; (1)

Defendants' claims on appeal that challenge the circuit court's

grant of declaratory judgment in favor of The Foundation; and (2)

Defendants' claim on appeal that the circuit court erred in

ly we note that in Center for Biological Diversity, 566 F.3d at 804, the

permanent injunction granted to the appellees under the Endangered Species Act

(ESA) for the protection of bald eagles became moot on appeal when the bald

eagle was taken off the endangered species list. Both the concurring and

dissenting opinions questioned whether the mootness of the appeal and the

appellate court's decision to vacate the trial court's judgment under the ESA

also required that the trial court's award of attorneys' fees to appellees as

the prevailing party on the ESA claim be vacated. The concurring opinion,

feeling bound by existing precedent, answered the question in the negative and

joined the lead opinion in upholding the award of attorneys' fees under the

ESA without considering the merits of the underlying ESA claim. ;Qp at 807-

08. The dissent, which distinguished prior precedent, answered the question

in the affirmative. ;Qp at 808-10.

Unlike in Center for Biological Diversity, the relief obtained by The

Foundation was not vitiated and undone by subsequent events. In addition, the

appellants in Center for Biological Diversity did not play a role in the case

becoming moot. Here, the case became moot because Tatibouet transferred his

interests in the Lot 30-A.Amended Lease to a third party during his bankruptcy

proceeding. See generally U.S. Bancorp Mortgage Co. v. Bonner Mall

Partnership, 513 U.S. 18, 23-29 (1994) (holding that mootness created by the

parties' settlement did not warrant vacating the lower court's judgment and

concluding that whether the party seeking relief from the judgment below

caused the mootness by voluntary action was the principal condition considered

in determining whether vacatur was appropriate). In these respects, the

circumstances presented by this case are different from those presented in

Center for Biological Diversity.

18

FOR PUBLICATION IN WEST'S HAWAI‘I REPORTS AND PACIFIC REPORTER

denying their motion for summary judgment. we affirm the portion

of the circuit court's July 22,

2004,

Final Judgment which entered

judgment in favor of The Foundation and against Tatibouet and

Coral Reef Development for attorneys'

On the briefs:

Rosemary T. Fazio

Kevin w. Herring

Jill M. Hasegawa

for Plaintiff-Appellee

James T. Bickerton

K. Bartlett Durand, Jr.

Terrence M. Lee

Nadine Y. Ando

(Bickerton Lee Dang &

Sullivan)

william Meheula

(winer Meheula & Devens)

for Defendants-Appe1lants

19

fees and costs.

@z/.%a¢,,%

J@;/v?. 7

@Mwa§-