Hawaii State Federal Credit Union v. VIP Towing LLC

NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
30-APR-2025
07:53 AM
Dkt. 76 SO

NOS. CAAP-XX-XXXXXXX and CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAIʻI

HAWAII STATE FEDERAL CREDIT UNION, a federal credit union,
Plaintiff-Appellee, v.
VIP TOWING LLC, a Hawaii limited liability company,
Defendant-Appellant.

APPEAL FROM THE DISTRICT COURT OF THE FIRST CIRCUIT
HONOLULU DIVISION
(CASE NO. 1DRC-XX-XXXXXXX)

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

In CAAP-XX-XXXXXXX, Defendant-Appellant VIP Towing

appeals from the District Court of the First Circuit's August 4,

2022 "Amended Order Denying Defendant's Motion to Set Aside

Default Judgment Filed on April 18, 2022" (Denial Order). 1 In

CAAP-XX-XXXXXXX, VIP Towing appeals from the district court's

December 5, 2022 Post-Judgment Order Granting Attorneys' Fees

1 The Honorable Karin L. Holma presided.
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and Costs (Fees and Costs Order). 2 Because these appeals involve

the same parties and stem from the same underlying case, this

court consolidated these appeals.

In 2020, Ryan D. Donlon financed the purchase of a

used truck through Hawaii State Federal Credit Union. On

March 4, 2021, VIP Towing towed Donlon's truck from a Honolulu

Walmart store to VIP Towing's lot. On April 22, 2021, the City

and County of Honolulu issued a Certificate of Title noting

Donlon was the truck's registered owner and Hawaii State was the

lienholder.

About two months later, in June 2021, VIP Towing sent

Hawaii State a notice of the tow and the thirty-day period to

claim the truck, citing Hawai‘i Revised Statutes (HRS) § 290-11

(2020): 3

2 The Honorable Summer M.M. Kupau-Odo presided.

3 HRS § 290-11 provided in pertinent part:

(a) Notwithstanding any other provision of this
chapter, any vehicle left unattended on private or public
property without authorization of the owner or occupant of
the property, may be towed away at the expense of the
vehicle owner, by order of the owner, occupant, or person
in charge of the property; provided that there is posted a
notice prohibiting vehicles to park on the property without
authorization.

. . . .

(b) Towing companies engaged by the owner,
occupant, or person in charge of the property shall:

. . . .

(continued . . .)

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(. . . continued)

(3) Determine the name of the legal owner and the
last registered owner of the vehicle from the
department of transportation or the county
department of finance. The legal owner and the
last registered owner shall be notified in
writing at the address on record with the
department of transportation or with the county
department of finance by registered or certified
mail of the location of the vehicle, together
with a description of the vehicle, within a
reasonable period not to exceed fifteen days
following the tow. The notice shall state:

(A) The maximum towing charges and fees allowed
by law;

(B) The telephone number of the consumer
information service of the department of
commerce and consumer affairs; and

(C) That if the vehicle is not recovered within
thirty days after the mailing of the notice,
the vehicle shall be deemed abandoned and
will be sold or disposed of as junk.

Where the legal owner and the last registered
owner have not been notified pursuant to this
paragraph, the vehicle may be recovered by the
vehicle owner from the towing company without
paying tow or storage fees. The notice need
not be sent to a legal owner or last registered
owner or any person with an unrecorded interest
in the vehicle whose name or address cannot be
determined. Absent evidence to the contrary, a
notice shall be deemed received by the legal
owner or last registered owner five days after
the mailing;

. . . .

(g) Any person who violates any provision of this
section shall be deemed to have:

(1) Engaged in an unfair or deceptive act or
practice in the conduct of any trade or commerce
within the meaning of section 480-2 and subject
to penalties and remedies under chapter 480; and

(2) Furnished services without a license within the
meaning of section 487-13 and subject to
penalties and remedies under chapter 487.

(Emphases added.)

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This is to inform you that the Department of Finance,
Division of licensing, has informed us that you are the
legal and/or registered owner of the above described
vehicle, which was towed to our lot. If this vehicle is
not claimed within Thirty Days (30) after the date of this
notice, the company will conclude your authorization of
said vehicle to be sold, or disposed of as provided in
section 290-11, [HRS].

On July 9, 2021, Hawaii State filed a complaint in

district court asserting violation of HRS § 290-11 (Count 1) and

conversion (Count 2). The complaint also sought restitution,

damages, and reimbursement of costs and expenses including

attorneys' fees.

According to the complaint, Hawaii State contacted VIP

Towing and was told the truck "had been 'disposed of.'" VIP

Towing later informed Hawaii State the June 2021 notice was sent

in error, VIP Towing was not in possession of the truck, and the

truck was "released to an unidentified individual."

The filed Return of Service indicates that, after four

unsuccessful attempts to serve the complaint and summons on VIP

Towing, the process server served VIP Towing's agent, Myhanh

Huynh, with the documents on August 23, 2021. In the

acknowledgment of service section, "Refused to sign" was stamped

in lieu of a signature.

The summons informed VIP Towing it was required to

file a written answer or appear at 1111 Alakea Street, tenth

floor "at 1:30 p.m. on the second Monday following date of

service, and should that Monday be a legal holiday then on the

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next business day." 4 The summons also provided a Zoom meeting ID

number and phone number. In bold capital letters, the summons

warned that failure to attend the hearing or file a written

answer would result in a default judgment.

VIP Towing did not file an answer by September 7, 2021

or appear at the September 7, 2021 hearing.

Hawaii State moved for a default judgment. On

October 21, 2021, the district court entered a Default Judgment

in favor of Hawaii State, awarding it $38,440.14 (including

attorneys' fees and costs).

Two months later, Hawaii State filed an "Ex Parte

Motion for Examination of Person Having Knowledge of Judgment

Debtor(s)[,]" asking the district court to enter an order

directing Huynh, as VIP Towing's agent, to appear in district

court and be examined under oath. The district court granted

the motion. The process server attempted to serve the motion

three times, but Huynh evaded service and refused to sign.

Huynh did not appear at the hearing on the motion and the

district court continued the hearing to April 18, 2022. Huynh

did not appear at the April 18, 2022 hearing. The district

4 As the second Monday following August 23, 2021 (the date of service)
was September 6, 2021, Labor Day, the date for VIP Towing to file a written
answer or appear was Tuesday, September 7, 2021. See HRS § 8-1 (2009)
(noting first Monday in September is Labor Day and a state holiday); District
Court Rules of Civil Procedure (DCRCP) Rule 6(a) (indicating where a deadline
falls on a legal holiday, "the period runs until the end of the next day
which is not a" legal holiday).

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court then issued a bench warrant for Huynh's arrest, with bail

set at $50.00.

That same day, which was almost six months after

Default Judgment was entered, VIP Towing moved to set aside the

default, citing District Court Rules of Civil Procedure (DCRCP)

Rules 7 and 55. 5 The motion was supported by the declaration of

Frances Freitas, who stated she was VIP Towing's "Corporate

Secretary" and that the motion should be granted because VIP

Towing was not served and had strong defenses. The entirety of

her declaration stated:

VIP Towing LLC was never served with the Complaint and
Notice(s) of Court Date, and accordingly was not able to
appear in Court. Moreover, VIP Towing LLC never had an
opportunity to defend itself in the above-referenced
matter. VIP Towing LLC has strong defenses and is prepared
to present its case on the merits.

(Emphases added.) There were no attachments to the motion.

5 DCRCP Rule 7(b) provides in relevant part:

An application to the court for an order shall be by motion
which, unless made during a hearing or trial, shall be made
in writing, shall state with particularity the grounds
therefor, and shall set forth the relief or order sought.
The requirement of writing is fulfilled if the motion is
stated in a written notice of the hearing of the motion.

DCRCP Rule 7(b)(1). And, DCRCP Rule 55(c) provides:

Setting aside default. For good cause shown the court may
set aside an entry of default and, if a judgment by default
has been entered, may likewise set it aside in accordance
with Rule 60(b).

When a motion to set aside either an entry of default
or a judgment by default is denied, the court in denying
the motion may award to the non-defaulting party those
reasonable attorney's fees incurred to defend the motion.

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Hawaii State opposed the motion to set aside the

default and attached a webpage printout entitled "DCCA State of

Hawaii" showing Huynh was VIP Towing's agent. Also attached was

a declaration from the process server that stated, "Huynh met me

at the entrance of the garage, and I confirmed her name[,]" "I

attempted to hand her the documents but she refused to hold

them[,]" "I placed the documents at Huynh's feet, and informed

her of completed service[,]" and "Huynh kicked the documents,

and acted very upset."

During the hearing on VIP Towing's motion to set aside

the default, VIP Towing's counsel asserted various purported

facts but presented no evidence to the district court. The

district court denied VIP Towing's motion. The district court

later awarded Hawaii State $1,753.40 in attorneys' fees and

$355.29 in costs related to the motion to set aside the default.

On appeal, VIP Towing challenges the Denial Order and

the Fees and Costs Order.

Upon careful review of the record and the briefs

submitted by the parties and having given due consideration to

the issues raised and the arguments advanced, we resolve this

appeal as discussed below.

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(1) VIP Towing contends the district court abused its

discretion in denying the motion to set aside the default as

there was no identifiable prejudice to Hawaii State, VIP Towing

had meritorious defenses, and VIP Towing was not served with the

complaint, summons, or notice of the hearing. 6

DCRCP Rule 4(d)(3) requires the complaint and summons

be served together upon a corporation, partnership, or "other

unincorporated association which is subject to suit under a

common name, by delivering a copy of the summons and of the

complaint to an officer, a managing or general agent, or to any

other agent authorized by appointment or by law to receive

service of process[.]"

DCRCP Rule 12(a) requires all defendants to "appear or

answer at the time appointed in the summons, on the second

Monday following the date of service, except where the district

judge sets some other secular day; and should such Monday be a

legal holiday then upon the next secular day." And, following

DCRCP Rule 55(a), "[w]hen a party against whom a judgment for

affirmative relief is sought has failed to plead or otherwise

defend as provided by these rules, and the fact is made to

6 We note that, in the points of error section of its CAAP-XX-XXXXXXX
opening brief, VIP Towing does not challenge the district court's oral
findings. Hawai‘i Rules of Appellate Procedure Rule 28(b)(4); see Okada
Trucking Co. v. Bd. of Water Supply, 97 Hawai‘i 450, 458, 40 P.3d 73, 81
(2002) ("Findings of fact . . . not challenged on appeal are binding on the
appellate court.").

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appear by affidavit or otherwise, the clerk shall enter that

party's default."

A district court may enter default judgment after

damages are determined. See DCRCP Rule 55(b)(2). 7 "For good

cause shown the court may set aside an entry of default and, if

a judgment by default has been entered, may likewise set it

aside in accordance with Rule 60(b)." DCRCP Rule 55(c)

(emphasis added).

DCRCP Rule 60(b) explains a district court may provide

relief from a final judgment for:

(1) mistake, inadvertence, surprise, or excusable neglect;

(2) newly discovered evidence which by due diligence could
not have been discovered in time to move for a new trial
under Rule 59(b);

(3) fraud . . . , misrepresentation, or other misconduct of
an adverse party;

(4) the judgment is void;

(5) the judgment has been satisfied, released, or
discharged, or a prior judgment upon which it is based has
been reversed or otherwise vacated, or it is no longer
equitable that the judgment should have prospective
application; or

(6) any other reason justifying relief from the operation
of the judgment.

7 DCRCP Rule 55(b)(2) provides:

In all other cases the party entitled to a judgment by
default shall apply to the court therefor. If, in order to
enable the court to enter judgment or to carry it into
effect, it is necessary to take an account or to determine
the amount of damages or to establish the truth of any
averment by evidence or to make an investigation of any
other matter, the court may conduct such hearings as it
deems necessary and proper.

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(Formatting altered.) To prevail on a Rule 60(b) motion, the

movant must show "(1) that the nondefaulting party will not be

prejudiced by the reopening, (2) that the defaulting party has a

meritorious defense, and (3) that the default was not the result

of inexcusable neglect or a wil[l]ful act." Chen v. Mah, 146

Hawai‘i 157, 172, 177, 457 P.3d 796, 811, 816 (2020) (emphasis

added and citation omitted).

Because the district court entered a default judgment

in this case, VIP Towing could have moved for relief from the

judgment under DCRCP Rule 60(b). However, VIP Towing moved to

set aside the default pursuant to DCRCP Rules 7 and 55, not

DCRCP Rule 60(b). And at the hearing on the motion to set aside

default, VIP Towing relied on DCRCP Rule 55(c) and asserted

there was "good cause" to grant its motion. Thus, VIP Towing's

motion to set aside the default failed to raise and address

DCRCP Rule 60(b).

To the extent we may construe VIP Towing's claim that

it was not served with the complaint and summons as a mistake or

excusable neglect under DCRCP Rule 60(b)(1), the record does not

support such a claim. See Bank of Hawaii v. Shaw, 83 Hawai‘i 50,

56, 924 P.2d 544, 550 (App. 1996) (holding that orders denying

motions for relief for excusable neglect under DCRCP

Rule 60(b)(1) are reviewed for abuse of discretion).

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Here, the district court made the following findings

during the hearing on VIP Towing's motion to set aside the

default: "the complaint was personally served on" Huynh; "Huynh

is the agent of record for VIP Towing"; Huynh "threw the papers

on the ground"; Huynh "refused to sign the service"; "VIP,

through its agent, which is the very purpose of having an agent

designated for service, had notice of the date"; and VIP

Towing/Huynh did not appear on the answer date. The district

court made further findings regarding Huynh's continued failure

to appear stating, "We haven't heard anything from . . . Huynh

through this whole thing." 8

Documents in the record, including the "DCCA State of

Hawaii" printout, the process server's declaration, the Return

of Service, and the summons, support these findings. The only

evidence VIP Towing presented the district court to support its

motion to set aside the default was Freitas' declaration, which

noted VIP Towing "was never served" but did not address service

on Huynh. Thus, we cannot say that VIP Towing showed "the

default was not the result of inexcusable neglect or wil[l]ful

act." See Chen, 146 Hawai‘i at 172, 457 P.3d at 811. And VIP

8Huynh first participated in these proceedings via a declaration
attached to VIP Towing's September 9, 2022 motion to stay, which was over
three months after the May 23, 2022 hearing on VIP Towing's motion to set
aside the default.

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Towing did not present any other evidence to the district court

to support its claim of "strong defenses."

Based on the foregoing, the district court did not

abuse its discretion in denying VIP Towing's motion to set aside

default.

(2) VIP Towing next contends "the trial court's fee

award under HRS § 607-14.7 [(2016)] is an abuse of discretion,

because the award exceeds the statutory cap for post-judgment

fees to collect the judgment at issue." 9

HRS § 607-14.7 provides:

In addition to any other attorney's fees, costs, and
expenses, which may or are required to be awarded, and
notwithstanding any law to the contrary, the court in any
civil action may award to a judgment creditor, from a
judgment debtor, reasonable attorney's fees, costs, and
expenses incurred by the judgment creditor in obtaining or
attempting to obtain satisfaction of a money judgment,
whether by execution, examination of judgment debtor,
garnishment, or otherwise. The court may award attorney's
fees that it determines are reasonable, but shall not award
fees in excess of the following schedule:

(1) Twenty-five per cent on the first $1,000 or
fraction thereof;

(2) Twenty per cent on the second $1,000 or fraction
thereof;

(3) Fifteen per cent on the third $1,000 or fraction
thereof;

(4) Ten per cent on the fourth $1,000 or fraction
thereof;

(5) Five per cent on the fifth $1,000 or fraction
thereof; and

9 VIP Towing also contends that "[b]ecause the underlying default
judgment must be reversed, the subsequent post-judgment attorney fee award
under HRS § 607-14.7" must be "reversed." Because the district court did not
abuse its discretion in denying the motion to set aside default, we need not
address this contention.

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(6) 2.5 per cent on any amount in excess of $5,000.

The fees shall be assessed on the amount of judgment,
exclusive of costs and all other attorney's fees.

(Some formatting altered and emphases added.)

Here, the district court awarded Hawaii State

$31,168.17 (principal amount of $30,122.63 and $1,045.54 in

interest) in the Default Judgment. Based on the schedule

outlined in HRS § 607-14.7, the district court was allowed to

award Hawaii State up to $1,404.20 in attorneys' fees. 10

Because the award of $1,753.40 in attorneys' fees

exceeded the limit allowed under HRS § 607-14.7, the district

court abused its discretion.

Based on the foregoing, we vacate the district court's

Fees and Costs Order to the extent the award of attorneys' fees

exceeded the amount allowed under HRS § 607-14.7; we otherwise

affirm the Denial Order and Fees and Costs Order. We remand

10 Under HRS § 607-14.7, the maximum amount of attorneys' fees are
calculated as follows:

25% * $1,000 = $250
20% * $1,000 = $200
15% * $1,000 = $150
10% * $1,000 = $100
5% * $1,000 = $50
2.5% * ($31,168.17-$5,000) = $654.20

The total is $1,404.20 ($250 + $200 + $150 + $100 + $50 + $654.20 =
$1,404.20).

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this case to the district court for further proceedings

consistent with this summary disposition order.

DATED: Honolulu, Hawai‘i, April 30, 2025.

On the briefs: /s/ Keith K. Hiraoka
Presiding Judge
Sheri J. Tanaka,
for Defendant-Appellant. /s/ Clyde J. Wadsworth
Associate Judge
Jonathan W.Y. Lai,
Thomas H. Yee, /s/ Sonja M.P. McCullen
(Watanabe Ing), Associate Judge
for Plaintiff-Appellee.

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