One of the original owners of the infamous “purple spot” in West O`ahu’s Lualualei Valley is under greater pressure to squeeze the most money out of the property now that he has lost his fight to keep his interest in Tropic Land, LLC, out of the reach of creditors.
On August 21, the U.S. Bankruptcy Appellate Panel of the 9th Circuit affirmed decisions by the U.S. Bankruptcy Court for the District of Hawai`i that allowed Hawai`i National Bank to collect $2.4 million from Sunra Coffee, LLC, and Michael Nekoba.
Nekoba, owner of The Mortgage Group and a member of Sunra, is one of the three original principals of Tropic Land, which a few years ago proposed developing nearly 100 acres of agricultural land in Lualualei Valley into a light industrial park. State business registration records also list Nekoba as Tropic Land’s agent. (Arick Yanagihara, a financial consultant at The Mortgage Group, is Tropic Land’s project manager.)
The other Tropic Land investors were developer Tom Enomoto and entrepreneur Clyde Kaneshiro. Enomoto has since transferred his interest in the company to MS Sherwood, a company owned by his sister. In a declaration to the court, Nekoba stated that he, Enomoto, and Kaneshiro paid $3 million for 260 acres in Lualualei Valley. Nekoba’s contribution to the purchase was $870,000.
According to attorneys representing Nekoba and HNB in the bankruptcy case, the bankruptcy appellate panel, or BAP, imposed a lien on Nekoba’s interest in Tropic Land. Although a March 2011 writ of execution from the bankruptcy court suggests that Nekoba’s interest was to be sold at public auction within 60 days, Keith Yamada, HNB’s attorney, says no deadline applies.
The bankruptcy action began after Sunra and Nekoba defaulted on an HNB loan for their Royal Hualalai Gardens development on the Big Island. The bank filed a complaint in 3rd Circuit Court in December 2008, which was moved to federal bankruptcy court about a year later.
The bank bought the 214-acre Hualalai property at a foreclosure auction, leaving Sunra and Nekoba with a remaining debt of $2.4 million. The court issued a judgment against Sunra, Nekoba, and real estate investment company ADI, LLC, for that amount on September 23, 2010. (ADI, now defunct, was run by Sunra member Mariko Ejiri.)
When it came time to disclose his assets, Nekoba argued that his one-third interest in Tropic Land was off limits, since it was held jointly by his wife, Daryl.
“HNB argued that, as to Tropic Land, LLC, Nekoba had owned his member interest in that company for five years as an individual before transferring it to him and his wife on September 30, 2010, seven days after entry of the judgment against him on September 23, 2010,” the BAP decision states.
In Honolulu, U.S. bankruptcy judge Robert Faris determined in October 2011 that Nekoba intended to “hinder, delay, or defraud” HNB when he transferred his interest to him and his wife. The bank was, therefore, entitled to “enforce its remedies as a judgment creditor” against Nekoba’s interest in Tropic Land, Faris found.
Nekoba challenged the court’s jurisdiction over the case, but both Faris and the appellate panel found that his challenge came too late.
“[W]e agree with the bankruptcy court that it is simply too late for Nekoba to collaterally attack the bankruptcy court’s subject matter jurisdiction, because the judgment is clearly final,” the appellate panel wrote, noting that it wasn’t until July 2011 that Nekoba changed his position on the merits of the case and challenged the court’s authority.
The BAP decision heaps another large debt on Nekoba. Last year, along with Enomoto, the Sunra-related Two Tigers Fund, LLC, and others, Nekoba was found by a 1st Circuit judge to owe Central Pacific Bank roughly $4 million for defaulting on a loan for the Bay View golf course in East O`ahu.
How these judgments will affect the proposed development on Tropic Land’s property in Lualualei Valley is unclear. Neither Nekoba nor Yanagihara returned calls or emails by press time. Before any development can occur, the company will need the state Land Use Commission to redistrict the land from Agriculture to Urban.
On May 16, 2011, after a series of hearings, the LUC denied a petition from Tropic Land to amend its property’s designation. On April 21, the LUC had voted 5-3 to approve a boundary amendment, but because six affirmative votes are needed, the commission effectively denied the petition.
Nekoba told the bankruptcy court last year, after the LUC’s decision, that Tropic Land was looking for other uses of its property because the agency’s rules prevented the company from reapplying for a boundary amendment for one year after a denial. It’s been more than a year now since the LUC’s decision, but no new petition had been filed as of mid-October.
In February, the Honolulu City Council voted to approve a new Wai`anae Sustainable Communities Plan, which allows the county to spot zone Tropic Land’s property as Industrial.
Volume 23, Number 5 — November 2012