“I bought a piece of property and I improved it. Nobody wanted it when I bought it. My own daughter said it’s the worst piece of property she ever saw and I made the biggest mistake of my life,” said James Pflueger in a deposition taken this February.
So nobody wanted the land at Pila’a? If that had really been the case, Pflueger, the retired Honolulu Honda magnate, might have two fewer lawsuits to contend with.
One was filed by one of his relatives, the other, by his own companies.
Christiane Bintliff-Click, a beneficiary of the Mary N. Lucas Trust, filed a petition in June 2002 seeking the removal of co-trustees Paul Cassiday and James Pflueger, an accounting of the trust assets, and the voiding of the sale of trust property to Pflueger Properties on April 10, 1997.
The Lucas family bought the property in the early 1900s. For decades, the trust owned about 3,000 acres of land in the Agriculture and Conservation districts of Hanalei. Recently, much of that land has been put up for sale.
In 1990, Pflueger bought nearby property at Kilauea from the trust. Because Pflueger is a co-trustee, probate court approval was sought and granted. In the case of the Pila’a property, however, Bintliff-Click alleges that Cassiday, who approved the sale, failed to get probate court approval of the conveyance to Pflueger Properties. (The most recent filings with the state Department of Commerce and Consumer Affairs identify James Pflueger as a general partner of Pflueger Properties; the other general partner is Pflueger Management, of which James Pflueger and accountant Dennis Duban are the two managing partners.)
Under state law, the complaint notes, “A trustee cannot exercise a trust power without prior court authorization where there is a conflict between a trustee’s fiduciary duty and his individual interest.” The suit goes on to allege such conflicts in detail.
According to Bintliff-Click, on October 10, 1995, Cassiday and Pflueger entered into a listing agreement with Tracy Pflueger Bryan, Pflueger’s daughter and an agent with Coldwell Banker Pacific Properties and Sleeping Giant Realty. The agreement was for Pflueger Bryan to sell the Pila’a property for not less than $7 million. (Bryan is herself identified in the suit as a beneficiary of the Lucas Trust.)
On December 4, 1996, “as the Kaua’i economy began to improve,” the petition states, local Kaua’i developer Lee Joseph, through his real estate agent, submitted an offer of $4.8 million for the property. After receiving no response, Joseph later increased his offer to $5.8 million on December 27. Again, he got no response.
In mid-January 1997, Sleeping Giant agent Debra Blachowiak and Cassiday responded to Joseph’s bid with a “non-binding” counter-offer of $6.9 million. While the counter-offer was pending, on January 17, Cassiday notified Pflueger that Pflueger Properties could buy the land for $6.4 million, the petition states.
On January 22, Joseph offered to buy the land for $6.4 million, the lawsuit says, but this was ignored. Less than 24 hours later, according to the petition, James Pflueger instructed Bryan to prepare a sales contract for the same amount on behalf of Pflueger Properties (of which Bryan is limited partner).
Within days, the chronology in the lawsuit continues, Cassiday sought and received consent from some of the trust’s beneficiaries to sell the property to Pflueger. Conditions of sale were: $1 million payable at closing, $1 million payable six months later, and the balance payable on a three-year promissory note in favor of the Trust with an option to extend one year for an additional $1 million at closing.
A disclosure letter Cassiday prepared for the beneficiaries’ review compared Pflueger’s and Joseph’s offers. The Pflueger offer was described as “an improvement in terms, a shorter closing date, less contingencies, and in my opinion, a greater chance of closing without further adjustment in the sales contract.”
But according to Bintliff-Click, it was just the opposite: The Joseph offer provided $1.8 million in cash at closing compared to Pflueger’s $1.075. The trust would have had to grant a smaller loan, $4.6 million, to Joseph compared to the $5.325 million loan to Pflueger. Joseph, the petition says, also had a personal guarantee from a “rumored billionaire,” and his loan would have been paid off in two years, not three.
Since closing, Pflueger has defaulted or violated a number of the terms of the sale, Bintliff-Click says in the suit: He never paid the full $1 million at closing, he failed to pay the $1 million promised six months afterward, and he approved the extension of his own loan for five years when he was only allowed a one-year extension.
Also, the suit alleges, Cassiday and Pflueger failed to file a petition for approval of sale and failed to get court authorization before the sale as mandated by Section 555A-5(b) of Hawai’i Revised Statutes.
In a deposition taken in February, Pflueger acknowledged that he had to “excuse myself as a trustee when I’m dealing with a piece of property that I bought as in individual.” But apparently, that wasn’t done, since he not only approved his own loan extension, but signed for the trust and Pflueger Properties on the limited warranty deed conveying the land to Pflueger Properties in April 1997. He also signed as the seller (Pflueger Properties), purchaser (Pila’a 400, LLC), and lender (Lucas Trust) when Pila’a 400 assumed the mortgage in 2001. That year, Pila’a 400 LLC acquired the land from Pflueger Properties through a warranty deed.
Other trust property disputes have put the resolution of Bintliff-Click’s petition on hold, and the whole affair has left beneficiaries divided.
Apparently as a hedge against an unfavorable outcome to the Bintliff-Click litigation, Pflueger Properties and Pila’a 400 LLC filed suit last April against Cassiday and Pflueger, claiming breach of warranties, breach of contract, unjust enrichment, promissory estoppel, negligent representation, and negligence.
The suit is unusual considering that Pflueger owns Pflueger Properties and is managing partner of Pila’a 400 (again, with accountant Duban).
“I bought [the Pila’a land] because I love the land and I love Lucas Trust,” Pflueger said during his February deposition.
“When you say ‘you,’ you mean Pflueger Properties?” he was asked. To which he responded, “Jimmy Pflueger and Pflueger Properties are one and the same.”
— Teresa Dawson
Volume 14, Number 2 August 2003