Judge denies attorney’s motion to stop construction at Coco Palms property

Fifth Circuit Court Judge Randal Valenciano on Thursday denied an attorney’s motion to grant a preliminary injunction to stop all construction work on a controversial 350-unit hotel on the site that once housed the iconic Coco Palms Resort on Kauaʻi.

Honolulu-based attorney Keith Kiuchi had filed the motion in an attempt to get leverage for his client, mortgage broker Paul Honkavaara, who claims he is owed $1 million by the previous developer.

The motion requested that Valenciano order the current developer of the property, Reef Capital Partners, to stop all work on the $400 million project. Kiuchi had previously argued that any demolition or construction activities at the site were not legal because the permits were in the name of an entity of Reef Capital Partners that no longer owns the property. 

In June, a three-judge panel of the Hawaiʻi Intermediate Court of Appeals canceled the 2021 foreclosure sale of the property that had transferred ownership from Coco Palms Hui to Utah investment firm Private Capital Group, an agent of Reef Capital Partners. 

However, Reef Capital Partners’ attorneys dealt with that matter in a separate motion, asking for the title to go back to Coco Palms Hui. That motion was granted in court on Oct. 21, and Valenciano noted in court Thursday that both parties had agreed to the title going back to Coco Palms Hui. 

The court hearing on Thursday in Līhuʻe dealt with three issues: leave for Honkavaara to file a counterclaim, a preliminary injunction barring any further work on the property, and the appointment of a receiver. 

Regarding the request for the preliminary injunction, Kiuchi argued that since the foreclosure case was reversed on appeal, the property should be put back to its state before the foreclosure occurred. 

“For RP 21 to continue to do construction when the foreclosure has been set aside … I think is inappropriate,” he said.

Reef Capital attorneys Cal Chipchase and Mauna Kea Trask said they were there representing Coco Palms Hui. They have previously said both RP 21 Coco Palms and Coco Palms Hui are owned by Reef Capital Partners; and they have represented both entities in other hearings. 

On Thursday, Chipchase said Kiuchiʻs motion for an injunction to stop work was based on RP 21 Coco Palms doing work on the property, but he said RP 21 Coco Palms is not a party to this proceeding.

Since the title is now back in the name of Coco Palms Hui, it is Coco Palms Hui who is doing work on the property, Chipchase said.

Chipchase also said the injunction should not be approved because Kiuchi has admitted he canʻt show a likelihood of success and has not shown any irreparable harm.

“The harm, if any … is the payment of damages,” and the availability of monetary relief means there cannot be irreparable harm, he argued.

Valenciano told Kiuchi that since Honkavaara can’t show he’s likely to prevail on the foreclosure defense, he would deny the request for a preliminary injunction. 

While opponents of the $400 million project had hoped the judge would grant a preliminary injunction that could lead to halting the work for good on a sacred site, Kiuchi said his client doesn’t care if the project eventually is built.

“My client wants to get paid,” he said previously.

Valenciano denied without prejudice the other two matters – leave for a counterclaim and the appointment of a receiver – meaning Kiuchi can refile the motions and ask for them to be heard in court again.

Regarding the counterclaim issue, Kiuchi argued that the plaintiffs did not submit a loan servicing agreement or other evidence to prove they were the lenders. 

Chipchase told the court that Kiuchi needed to file the claim through an additional procedural step, under Hawaiʻi Rules of Civil Procedure, rules 13 and 15, so that Coco Palms Hui would not be the plaintiff in the case.

Valenciano told Kiuchi he was denying that motion without prejudice, so that Honkavaara could file a counterclaim through the proper filing process. Kiuchi said he did not have a problem with Valenciano’s decision, as long as he could file it again.

Kiuchi said his request for the appointment of a receiver was due to RP 21 and Coco Palms Hui being described as one and the same with Private Capital Group. There are other parties with an interest in the property, he said, referring to the different entities that contributed to the more than $22 million loan to Coco Palms Hui in 2016. 

“I think it would be in the best interest of all parties concerned to appoint a receiver rather than have Coco Palms Hui, who Jon Day, the principal of PCG (Private Capital Group), claims is basically one and the same with them.”

Kiuchi also took issue with the question of who the attorneys are representing.

“He (Chipchase) just said out of his own mouth, heʻs concerned for Coco Palms Hui,” Kiuchi said. 

“Is he representing plaintiff Private Capital Group? Is he representing Coco Palms Hui? He argued a receiver was needed because Private Capital Group was acting in concert with defendant Coco Palms Hui.  

“You need to have a receiver because basically the plaintiff is treating all of these entities as one and the same: RP 21, Coco Palms Hui, and PCG (Private Capital Group),” Kiuchi said. 

He also said that the permits have not been transferred to Coco Palms Hui, but are in the name of RP 21 Coco Palms, suggesting Chipchase was not telling the truth about the claim that all work was being done under Coco Palms Hui. 

But Chipchase said Kiuchi was not arguing for his client Honkavaara, but instead to protect parties “who are not really identified in any form and have not shown any interest or need to be protected.”

He also said to appoint a receiver, there must “be a showing of fraud or a showing of a risk of waste or fraud.”

Kiuchi hasnʻt attempted to make those showings, so the request doesnʻt meet the basic standard, Chipchase said.

Valenciano initially denied the request for the receiver but later denied it without prejudice after Kiuchi said the issue may “come up again in the future.”