$13.4M Oceanside mortgage foreclosed


The same day plaintiffs in a lawsuit against 1250 Oceanside Partners announced they had reached an impasse after several years of negotiations, a South Kona property owner signed a $13 million complaint against the developer.

Ackerman Ranch in December filed a foreclosure action against the defunct developer, seeking $15 million to repay it for a mortgage that 1250 Oceanside never paid, according to documents filed with the 3rd Circuit Court in Kona. They entered the mortgage agreement Oct. 27, 2005, the same day three plaintiffs who successfully stopped construction on the $1 billion development in 2003 said negotiations with Oceanside and Hawaii County had failed.

Roy Vitousek, the Ackermans’ attorney, said the family’s land was already leased to Hokulia developer Oceanside in 2005 when the company sought to buy it outright. The family agreed, and according to court documents, Oceanside had until October 2010 to repay the $13.4 million mortgage note. In 2010, when the payment was not rendered, the Ackermans agreed to allow Oceanside to make quarterly interest payments at a rate of 7.5 percent. Those payments stopped in October 2011.

The foreclosure action, although it names Hawaii County as a party, should not have any bearing on plans to complete the long-awaited Mamalahoa bypass road, Vitousek said.

“I hope not,” Vitousek said. “We’ve been meeting with the planning director to make sure.”

Corporation Counsel Lincoln Ashida said the county’s special counsel, retained to work on the county’s lawsuit to call the road work bond, included provisions that require the $20 million promissory note, backed by a mortgage on some of Oceanside’s land, to remain in place no matter who buys the property, or if it goes into bankruptcy.

“That cannot be undone by a bankruptcy decree,” Ashida said.

The Ackermans were supportive of the Hokulia development project and would be willing to talk with any potential buyers of the broader project about ways in which the land could remain part of the that project, but allow the Ackermans to be repaid, Vitousek said.

Otherwise, the case will proceed in court, where a bankruptcy commissioner will be appointed and take the property to a foreclosure or commissioner’s auction, Vitousek said.

He said he did not know, off hand how much land the Ackermans sold to Oceanside.

That lawsuit that stalled Hokulia by challenging the development of agricultural land without any agricultural uses, and a concurrent one from Protect Keopuka Ohana, were some of the first in a long series of lawsuits that ultimately ended the project permanently. Charles Flaherty was one of those three plaintiffs from the 2003 lawsuit.

He said the revelation, through court documents, that Oceanside owed on yet another mortgage has prompted him to reconsider his acceptance of a settlement agreement in 2006.

“Why in the world did Ackerman Ranch finance a $13 million mortgage for Hokulia two years after the project had been shut down as an illegal use of agricultural land?” Flaherty asked. “Why Hokulia and Ackerman Ranch did not disclose this obligation during the hundreds of hours of settlement negotiations and court hearings that have occurred since October 2005? It is now clear to me that I made a huge mistake signing the 2006 settlement agreement.”

He said Thursday he now wishes he had let the Hawaii State Supreme Court rule on the case rather than settle.

“Instead, the public could have benefited immensely through major legal precedent, such as the ‘private attorney general doctrine’ whereby government must pay for citizens’ attorneys’ fees when they are forced to sue because government is not following its own laws, rules and regulations,” Flaherty said.

Now, he added, the settlement agreement “has been basically ignored.”