Maui Beach Resort did not register its sales documents as securities, and the lawsuit alleges numerous failures to provide required information for securities fraud.
By Harry Eager - Staff Writer, The Maui News
reprinted courtesy Maui News 12/23/11
The struggle between unhappy buyers and the Honua Kai developer moved to a new venue this month when a Maui man filed suit in U.S. District Court in Honolulu.
Maui Beach Resort L.P. is facing numerous suits in state court, and the federal suit filed on behalf of Edward Quiring by P. Adam Davis of Lahaina repeats many of the same allegations of facts. However, it emphasizes the charge of securities fraud, which has been a part of state suits filed by Wailuku attorney Richard Rost for numerous clients.
Rost's complaints have mentioned the securities fraud aspect but have emphasized the alleged defects of the contracts. Adams mentions the contract defects, too.
According to the complaint, Quiring and his wife were Minnesota residents seeking to "live out their remaining years in peace." Mrs. Quiring, who was 75 when the sales agreement was signed in 2008, was ill with late-stage Alzheimer's disease and has since become completely disabled and paralyzed.
Quiring paid in $380,000 toward a $1,850,000 purchase price of the yet-to-be-built condo.
Honua Kai is what is sometimes called a condo-tel, in this case a mixed condo-tel, in which some units apparently were intended by buyers for their own use but others were to be placed into a rental pool most of the time.
According to Adams' complaint, the combined management, rental and control of the units by the developer "constituted the sale of securities," since it entailed representations to buyers about prospective income streams from the property.
Maui Beach Resort did not register its sales documents as securities, and the lawsuit alleges numerous failures to provide required information for securities sales.
The complaint also alleges that the developer informed the Quirings in 2010 that it would soon be ready to close and they would be required to provide the remaining $1.5 million or be placed in default.
When Quiring attempted to contact the developer within the alleged 20-day period to cure the failure to pay, the suit says, no one answered or returned his calls. For most of the time, the person they were told to call was away. A recorded message said she would return later.
The suit also alleges that the escrow agent disbursed all the money in the escrow account without proper authorization from the buyer. Also, that the developer failed to report to buyers material changes in the situation, such as a $303 million mortgage on the property.
The suit named Fidelity National Title and the sales agent Playground Destination Properties as defendants, and alleges violations of contract and securities law and other violations. It asks for damages and fees and a jury trial.
The case was assigned to District Judge Susan Oki Mollway. The defendants have not yet filed a reply to the allegations, and they could not be immediately reached for comment.
* Harry Eagar can be reached at heagar@mauinews.com.
reprinted courtesy Maui News 12/23/11, original link www mauinews.com/page/content.detail/id/556512.html
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