Papaku LLC v. Straub

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
25-OCT-2021
09:40 AM
Dkt. 92 SO
NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI#I

PAPAKU LLC, a Hawai#i limited liability company,
Plaintiff/Counterclaim Defendant-Appellee,
v.
ROBERT G. STRAUB, Defendant/Counterclaimant/
Cross-Claimant-Appellant,
and
LOTTIELOIS KAPONO, Defendant/Cross-Defendant

ROBERT G. STRAUB, Third-Party Plaintiff,
v.
COUNTY OF MAUI and TEENA RASMUSSEN,
Third-Party Defendants

APPEAL FROM THE CIRCUIT COURT OF THE SECOND CIRCUIT
(CIVIL NO. 2CC191000113)

SUMMARY DISPOSITION ORDER
(By: Ginoza, Chief Judge, Hiraoka and Wadsworth, JJ.)

Defendant/Counterclaimant/Cross-Claimant-Third-Party
Plaintiff-Appellant Robert G. Straub appeals from: (1) the "Order
Granting Plaintiff's [sic] Papaku LLC's Motion for Summary
Judgment Against Robert G [sic] Straub" entered by the Circuit
Court of the Second Circuit on November 5, 2019; and (2) the
"Amended Judgment Against Robert G [sic] Straub" entered on
February 24, 2020.1 For the reasons explained below, we affirm.

1
The Honorable Peter T. Cahill presided.
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On February 20, 2019, Plaintiff/Counterclaim Defendant-
Appellee Papaku LLC filed a complaint in the District Court of
the Second Circuit, Wailuku Division, against Straub and
Defendant/Cross-Defendant Lottielois Kapono. Attached to the
complaint were copies of: (1) a "Standard Lease" dated June 2,
2017, between Papaku and Straub, doing business as Ultra Hawaii
Maui Embroidery and Trophies; and (2) an "Assignment and
Assumption of Lease, Consent, and Amendment of Lease" between
Papaku, Straub, and Kapono.
Papaku's complaint alleged that Straub and Kapono were
in default of the Lease and the Assignment and owed $32,078.18
for unpaid rent and late charges. The Assignment, which had an
effective date of November 1, 2017, stated that Straub agreed "to
remain as personal guarantor on this lease for (1) one year."
Straub answered the complaint, counterclaimed against
Papaku, cross-claimed against Kapono, and asserted a third-party
complaint against the County of Maui and Teena Rasmussen.2
Straub also demanded a jury trial. The County and Rasmussen
answered the third-party complaint but asserted no claim against
Straub.
Kapono failed to answer the complaint; her default was
entered.
The district court ordered that Straub deposit $41,814
into the District Court Rental Trust Fund by March 13, 2019, or
the district court would issue a writ of possession and judgment
for possession of the leased premises. It does not appear that a
deposit was made. On March 20, 2019, the district court issued a
Judgment for Possession and a Writ of Possession in favor of

2
Straub's third-party complaint alleged that he filed charges of
discrimination with the federal Equal Employment Opportunity Commission and
the Hawai#i Civil Rights Commission after being wrongfully terminated from
employment by the County and Rasmussen. After he filed the charges, the
County and Rasmussen allegedly retaliated by developing "policies to prohibit
Straub's business, Ultra Hawaii, from doing business with most departments of
the County, causing the business to experience substantial declines in
revenue." As a result, Straub was allegedly unable to pay rent to Papaku,
forced to sell Ultra Hawaii to Kapono "at a substantial discount[,]" and
forced to guarantee the Assignment.

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Papaku and against Straub and Kapono. No appeal was taken. On
March 22, 2019, the remainder of the case was transferred to
circuit court because of Straub's demand for jury trial.
In circuit court, Papaku and Straub each filed a motion
for summary judgment. The record on appeal does not contain a
transcript of the hearing on the cross-motions. On November 5,
2019, the circuit court entered the Order, which granted Papaku's
motion and denied Straub's motion; ordered that judgment be
entered in favor of Papaku and against Straub for $72,886.09;3
and stated: "there being no just reason for delay, that the Court
expressly directs that Judgment is hereby entered pursuant to
Rule 54 and Rule 58 of the Hawaii [sic] Rules of Civil Procedure.
This is a Final Judgment resolving all claims and issues between
[Papaku] and [Straub]."
Straub's notice of appeal was filed on November 13,
2019. The circuit court entered the Judgment on January 29,
2020.4 The circuit court entered the Amended Judgment on
February 24, 2020.5
Straub's sole point of error contends that the circuit
court erred by granting Papaku's motion for summary judgment
because there existed a genuine issue of material fact. An
appellate court reviews a trial court's grant or denial of
summary judgment de novo. Joy A. McElroy, M.D., Inc. v. Maryl
Grp., Inc., 107 Hawai#i 423, 429, 114 P.3d 929, 935 (App. 2005).

[S]ummary judgment is appropriate if the pleadings,
depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there

3
Straub did not controvert Papaku's evidence of the amount of the
debt owed under the Lease and the Assignment.
4
A notice of appeal filed after announcement of a decision but
before entry of a written judgment or order is deemed filed immediately after
the time the judgment or order becomes final for the purpose of appeal. See
Rule 4(a)(2) of the Hawai#i Rules of Appellate Procedure.
5
On June 12, 2020, we temporarily remanded this case to the circuit
court to supplement the record with the Amended Judgment, pursuant to Life of
the Land v. Ariyoshi, 57 Haw. 249, 252, 553 P.2d 464, 466 (1976) and State v.
Joshua, 141 Hawai#i 91, 93, 405 P.3d 527, 529 (2017).

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is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law. A
fact is material if proof of that fact would have the effect
of establishing or refuting one of the essential elements of
a cause of action or defense asserted by the parties. The
evidence must be viewed in the light most favorable to the
non-moving party. In other words, we must view all of the
evidence and the inferences drawn therefrom in the light
most favorable to the party opposing the motion.

Id. (citations omitted).
Papaku counters that there was no genuine issue of
material fact because: there was no dispute about the contents of
the Lease or the Assignment; a lease is reviewed under principles
of contract law; and the construction and legal effect to be
given a contract is a question of law freely reviewable by an
appellate court. McElroy, 107 Hawai#i at 429, 114 P.3d at 935.
Papaku's motion for summary judgment was supported by a
declaration from its real property manager. The declaration
authenticated copies of the Lease and the Assignment. Straub did
not controvert the authenticity or the content of the Lease or
the Assignment.6 Accordingly, the construction and legal effect
to be given the Lease and the Assignment are questions of law
that we review de novo. McElroy, 107 Hawai#i at 429, 114 P.3d at
935.
The Lease provides, in relevant part:

[Papaku] . . . does hereby lease unto [Straub], and
[Straub] does hereby lease from [Papaku], those certain
. . . ("Premises") . . . upon the terms and conditions
hereinafter set forth:

1. SPECIFIC PROVISIONS:
. . . .

6
Straub's motion for summary judgment and opposition to Papaku's
motion were supported by a declaration from Straub's attorney authenticating
Papaku's notice to Kapono of her default and an accounting of payments due.
Straub's reply memorandum included no declaration or exhibit.

Papaku's opposition to Straub's motion attached an unsigned
declaration purporting to authenticate an email from Straub; because the
declaration was unsigned, the circuit court should not have considered it when
ruling on the cross-motions for summary judgment, and we do not consider it in
our de novo review. Papaku did not file a reply memorandum on its own motion
for summary judgment.

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e. The Term of this lease shall be Three (3) years,
commencing on or before July 1, 2017 and ending
on the [sic] June 30, 2020, unless sooner
terminated as herein provided.
f. (i) Monthly Base Rent: The monthly base rent
shall be as follows:

[rent schedule]
g. Amount of Security Deposit: $3,133.00
. . . .

23. ASSIGNMENT AND SUBLETTING:

a. [Straub] shall not assign . . . this lease . . .
without the written consent of [Papaku] first
had and obtained . . . .

. . . .

c. Any consent to any assignment . . . which may be
given by [Papaku] shall not constitute a . . .
release of [Straub] of the full performance by
it of the covenants contained in this lease.

d. Each assignee . . . shall assume and be deemed
to have assumed this lease and shall be and
remain liable jointly and severally with
[Straub] for the payment of the rent, additional
rent and adjustments of rent, and for the due
performance of all the terms, covenants,
conditions and agreements herein contained on
[Straub]'s part to be performed for the term of
this lease . . . .

47. GUARANTY OF PERFORMANCE OF TENANT:

In consideration of the execution of this lease by
[Papaku] and the leasing of the demised premises by
[Papaku] to [Straub], each of the parties signing and
executing this lease as a guarantor does hereby,
jointly with any other guarantor and severally,
unconditionally guarantee the full performance of each
and every term, covenant, and condition of this lease
to be kept and performed by [Straub], and if [Straub]
shall at any time default in the performance of the
terms, covenants, and conditions of this lease, said
guarantors will pay to [Papaku], upon receipt of a
written notice from [Papaku] of such default, the rent
hereunder and all arrearages thereof and all damages
that may arise as a consequence of any default by
[Straub] under this lease. The guaranty of each
guarantor under this Section and the liability of each
such guarantor hereunder shall not be subject to any
defenses of a guarantor or surety, it being
understood, acknowledged, and agreed by each such
guarantor that the liability of such guarantor shall
be that of a principal obligor and that [Papaku] shall
not be obligated to proceed against [Straub], any

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other guarantor of the performance of [Straub] under
this lease, or any other person, before proceeding
against such guarantor. The guaranty of each
guarantor shall be a continuing guaranty and the
liability of any guarantor shall in no way be affected
or diminished by an . . . amendment of this lease
. . . or any disaffirmance or abandonment by [Straub].

(Emphasis added.)
The Lease was signed by Straub as "Tenant" and as
"Guarantor." Exhibit C to the Lease was a Personal Guaranty that
provided:

In order to induce Papaku . . . to execute and enter
into that certain Lease Agreement . . . for the ("Premises")
. . . with Robert G [sic] Straub, . . . the undersigned,
Robert G. Straub, personally ("Guarantor") hereby
unconditionally guarantee(s) the full performance of and
agrees to perform or cause to be performed each and all of
the terms, covenants and conditions of the Lease Agreement
on the part of Tenant to be kept and performed, including
the payment of all rental, reimbursable and other amounts
provided therein. Guarantor further agrees as follows:

(1) That this Guaranty is an absolute and
unconditional guaranty of payment and of
performance without regard to the validity,
regularity, or enforceability of any obligation
of Tenant and regardless of any law, regulation,
or decree now or hereafter in effect which might
in any manner affect the obligations of Tenant,
any rights of [Papaku], or cause or permit to be
invoked any alteration of time, amount,
currency, or manner of payment of any of the
obligations hereby guaranteed. This Guaranty
shall be enforceable against Guarantor without
the necessity for any suit or proceedings on
[Papaku]'s part of any kind or nature whatsoever
against Tenant, and without the necessity of any
notice of acceptance of this Guaranty or of any
other notice or demand to which Guarantor might
otherwise be entitled, all of which Guarantor
hereby expressly waives; and Guarantor hereby
expressly agrees that the validity of this
Guaranty and the obligations of Guarantor
hereunder shall in nowise be terminated,
affected, diminished, or impaired by reason of
the assertion or the failure to assert by
[Papaku] against Tenant of any of the rights or
remedies reserved to [Papaku] pursuant to the
provisions of the Lease Agreement;
. . . .

(3) The liability of Guarantor hereunder shall in no
way be affected by . . . the assignment or
transfer of the Lease Agreement by Tenant
. . . ;

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. . . .
(5) That [Papaku] may at [Papaku]'s option bring a
separate action or actions against Guarantor
whether or not an action is brought against
Tenant and whether or not Tenant is joined in
any such action[.]

(Emphasis added.)
The Assignment provided, in relevant part:

This ASSIGNMENT AND ASSUMPTION OF LEASE, CONSENT, AND
AMENDMENT OF LEASE (this "Agreement") is made by and among
Papaku LLC, a Hawaii Limited Liability Company,("Landlord"),
Robert G. Straub dba Ultra Hawaii Maui Embroidery as ("Old
Tenant" or "Assignor") and Lottielois Kapono, Personally,
("New Tenant" or "Assignee") for the lease of the premises
. . . described in that certain unrecorded lease dated
June 2, 2017, as may be amended (the "Lease").
[Straub] now intends to assign all of [his] right,
title and interest as tenant under the Lease to [Kapono].
[Kapono] intends to assume the obligations of the tenant
under the Lease from [Straub], such assignment and
assumption to be effective as of November 1, 2017 (the
"Effective Date").

[Papaku] has agreed to consent to the foregoing
assignment and assumption, effective on the Effective Date
subject to the terms and conditions herein.

. . . .
1. Assignment. Effective on [November 1, 2017],
[Straub] hereby transfers and assigns to [Kapono] all of
[Straub]'s right, title and interest in and to the Lease,
including without limitation any rights to any security
deposit or any other monies which now or hereafter are or
become due to the tenant from [Papaku].

2. Assumption. Effective on [November 1, 2017],
[Kapono] hereby assumes for the benefit of [Papaku] under
the Lease the performance of all the obligations of [Straub]
accruing on and after [November 1, 2017] and agrees to pay
all rent, additional rent, and other charges under the Lease
and agrees to, and shall fully perform, all the terms,
covenants, provisions and conditions of the Lease herein
assigned, all with the full force and effect as if [Kapono]
had signed the Lease originally as the named tenant therein,
[Kapono] hereby acknowledging and confirming that [she] has
reviewed and fully understands all the terms of the Lease.
. . .
3. Consent. Effective on [November 1, 2017],
[Papaku] hereby consents to the foregoing assignment and
assumption. This consent shall not be construed (a) as a
release of [Straub] or [Kapono] from liability under the
Lease or (b) except as specifically provided in Section 6
below, to modify, waive or affect (i) any of the provisions,
covenants or conditions in the Lease; (ii) any of [Straub]'s

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or [Kapono]'s obligations under the Lease; (iii) any rights
or remedies of [Papaku] under the Lease or otherwise (or to
enlarge or increase [Papaku]'s obligations or [Straub]'s or
[Kapono]'s rights under the Lease or otherwise, all rights
of [Papaku] under the Lease being expressly reserved)[.]
. . . .

5. Amendments. Effective on [November 1, 2017],
the Lease is hereby amended as follows:
a. Tenant's Address for Notice. Tenant's
addresses for notices from and after [November 1, 2017]
shall be as follows:

(i) [Kapono]'s Address for Notice:
32 Hoola Hou Street
Wailuku, HI 96793
(ii) [Kapono] agrees to deposit
$3,3133.00 as Security Deposit with
[Papaku], for the full term of the lease.

(iii) [Papaku] will hold [Straub]'s
existing Security Deposit $3,133.00 for
the full term of the lease.

(iv) [Kapono] agrees to be a Guarantor
according to the Lease for the full term of the
lease and all its conditions set forth.

(v) [Straub] agrees to remain as
personal guarantor on this lease for (1)
one year. Providing [Kapono] has remained
in good standing with [Papaku] according
to the terms and conditions of the entire
Lease, [Papaku] shall than [sic] release
[Straub] as Guarantor and return
applicable security deposit.

6. Conformance. The provisions of the Lease are
hereby amended to conform to the provisions of Section 5
above, but in all other respects, such provisions are to be
and continue in full force and effect. This instrument is
made on the express condition that nothing herein contained
shall in any way be construed as affecting, impairing or
waiving any rights of [Papaku] under the Lease, except as
amended pursuant to this Agreement.

(Emphasis added.)

1. Straub's Liability as Guarantor Under
the Lease and the Assignment

First, Straub contends he "is released from his
liability as a guarantor" because Papaku did not first attempt to

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collect the debt from Kapono. Straub cites Lee v. Yano, 93
Hawai#i 142, 997 P.2d 68 (App. 2000), in which we held:

[A] guarantor does not promise the "same performance" as the
principal debtor. While a principal debtor promises to pay
a specified amount, a guarantor promises to pay that amount
only if it cannot be collected from the principal debtor.
See Schweitzer v. Fishel, 13 Haw. 690, 693 (1901) (holding a
guarantor and principal debtor were not "joint and several
obligors. They were severally parties to different
contracts with the plaintiffs"). . . .
. . . .

. . . [T]he creditor has a duty to pursue collection from
the debtor before pursuing collection from the guarantor.
As noted in Schweitzer, supra, "under a contract of
guaranty, the guarantor is released from liability to the
extent that [the guarantor] is injured by the neglect of the
creditor to press [the creditor's] claim with reasonable
diligence against the principal debtor." Schweitzer, 13
Haw. at 693.

Id. at 147-48, 997 P.2d at 74. Straub argues that Papaku's
failure to obtain a default judgment against Kapono, and to
exercise its creditors' remedies, before pursuing Straub under
the personal guaranty absolves him from liability as Kapono's
guarantor.
Straub's contention lacks merit. "The respective
rights of the guarantor and the creditor are determined by
reference to the terms of the contract between them." McElroy,
107 Hawai#i at 431, 114 P.3d at 937 (citation omitted). In
McElroy we held that a guarantor of a lease waived the right to a
jury trial by signing the guaranty, which stated that the
guarantor "shall and do [sic] hereby waive trial by jury." Id.
In this case, section 47 of the Lease constitutes a
waiver by Straub, as guarantor, of all "defenses of a guarantor
. . . , it being understood, acknowledged, and agreed by [Straub]
that the liability of [Straub] shall be that of a principal
obligor and that [Papaku] shall not be obligated to proceed
against Tenant, any other guarantor of the performance of Tenant
under this lease, or any other person, before proceeding against
[Straub]." Similarly, the terms of the guaranty signed by Straub
(Exhibit C to the Lease) made it "enforceable against [Straub]

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without the necessity for any suit or proceedings on [Papaku]'s
part of any kind or nature whatsoever against Tenant[.]" The
Assignment made Kapono the tenant. Accordingly, Papaku had the
right to proceed directly against Straub, as guarantor, for
relief from Kapono's default without first having to obtain a
judgment against Kapono.
Second, Straub contends that the terms of the guaranty
provisions in the Lease and the Amendment are ambiguous and
should be construed against the drafter, Papaku. The rule that
ambiguities in a contract are construed against the drafter is
not applied just because the contracting parties disagree about
the terms of the contract and there is an assertion of ambiguity.
Ambiguity is found, and the rule is applied, "only when the
contract taken as a whole[] is reasonably subject to differing
interpretation." Sturla, Inc. v. Fireman's Fund Ins. Co., 67
Haw. 203, 210, 684 P.2d 960, 964 (1984) (citation omitted).
The provision Straub contends is ambiguous is paragraph
5.a. of the Assignment. It states:

(v) [Straub] agrees to remain as personal guarantor on
this lease for (1) one year. Providing [Kapono] has
remained in good standing with [Papaku] according to the
terms and conditions of the entire Lease, [Papaku] shall
than [sic] release [Straub] as Guarantor and return
applicable security deposit.

Straub argues, "what is ambiguous is when that one-year term
begins."
There is no ambiguity. Paragraph 5 of the Assignment
states: "Effective on [November 1, 2017], the Lease is hereby
amended as follows . . ." Straub agreed to remain as personal
guarantor for one year after the Assignment, until November 1,
2018. If at that time Kapono remained in good standing with
Papaku under the Lease, Papaku would release Straub as guarantor
and return his security deposit (Kapono having paid her own
security deposit under the Assignment). Straub concedes that "on
October 30, 2018, Kapono owed Papaku $17,044.37." Because the
condition precedent to Straub's release as a guarantor was not

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satisfied, he remained a guarantor of his and Kapono's
performance and was not entitled to a return of his security
deposit.
Straub argues that he is at most a guarantor of
$17,044.37 of Kapono's debt to Papaku — the amount she owed on
November 1, 2018. Straub misconstrues the unambiguous terms of
the Assignment. Because Kapono was not in good standing under
the Lease at the end of the year following the Assignment, Papaku
was not obligated to release Straub as a guarantor and, as a
guarantor, Straub is liable for the entire amount of Kapono's
default.

2. Straub's Continuing Liability as Tenant
Under the Lease

Straub contends that the Assignment was a novation that
released him from liability as the tenant under the Lease. "[A]
discharge of a previous contractual duty is one of the essential
elements of a novation." Hawaii Builders Supply Co. v. Kaneta,
42 Haw. 111, 112, 1957 WL 10618, at **1 (1957). The terms of the
Lease and of the Assignment stated that Straub was not released
from his contractual duties under the Lease, except that he would
be released from liability as a guarantor if Kapono remained in
good standing under the Assignment for one year. As discussed
above, the condition precedent to the guarantor release never
occurred. See Id. at 115, 1957 WL 10618, at **3 ("Where the new
agreement is conditional, it is possible that the parties agreed
that on the happening of a condition there should be a novation,
and that until and unless the condition happened, the original
obligation should remain in force.") (citations omitted).
The term of the Lease ended on June 30, 2020. The
Lease provided that if Papaku consented to Straub's assignment of
his tenant's interest in the Lease, Papaku's consent "shall not
constitute a . . . release of [Straub] of the full performance by
it [sic] of the covenants contained in this lease." In addition,
Straub's assignee (Kapono) "shall assume and be deemed to have

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assumed this lease and shall be and remain liable jointly and
severally with [Straub] for the payment of the rent, additional
rent and adjustments of rent, and for the due performance of all
the terms, covenants, conditions and agreements herein contained
on [Straub]'s part to be performed for the term of this lease[.]"
Accordingly, after the Assignment, Straub continued to be liable
to Papaku for his obligations under the Lease.
Section 3 of the Assignment provided that Papaku's
consent "shall not be construed (a) as a release of [Straub]
. . . from liability under the Lease or (b) except as
specifically provided in Section 6 below, to modify, waive or
affect (i) any of the provisions, covenants or conditions in the
Lease[.]" Section 6 of the Assignment amended the Lease to
conform to the provisions of Section 5 of the Assignment.
Section 5 of the Assignment contained a conditional release of
Straub's liability as guarantor. "[I]n all other respects, such
provisions [of the Lease] are to be and continue in full force
and effect." Under the plain language of the Lease and the
Assignment, Straub continued to be liable as Tenant under the
Lease until the Lease term ended on June 30, 2020.
For the foregoing reasons, the "Order Granting
Plaintiff's [sic] Papaku LLC's Motion for Summary Judgment
Against Robert G [sic] Straub" entered on November 5, 2019, and
the "Amended Judgment Against Robert G [sic] Straub" entered on
February 24, 2020, are affirmed.
DATED: Honolulu, Hawai#i, October 25, 2021.

On the brief:
/s/ Lisa M. Ginoza
Russell A. Kelm, Chief Judge
for Defendant/Counterclaimant/
Cross-Claimant-Third-Party /s/ Keith K. Hiraoka
Plaintiff-Appellant Associate Judge
Robert G. Straub.
/s/ Clyde J. Wadsworth
Thomas R. Cole, Associate Judge
for Plaintiff/Counterclaim
Defendant-Appellee Papaku LLC.

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