Cowan v. Exclusive Resorts PBL1, LLC
Supreme Court of Hawaiʻi, Opinion filed 14 August 2025
“Contract-Specific Fee Clauses Defeat Statutory Fees in Assumpsit”

1. Introduction

Cowan v. Exclusive Resorts PBL1, LLC is the Hawaiʻi Supreme Court’s latest word on two recurring themes in real-property and fee-shifting jurisprudence:

1. When a resort developer’s vacation-club model crosses the line from “residential” to “commercial” use under restrictive covenants; and
2. Whether a prevailing defendant may invoke Hawaiʻi Revised Statutes (HRS) § 607-14 to recover attorney fees even where the governing contract awards fees only to a prevailing plaintiff.

The Court affirmed that the lot owner’s actual use did not violate the subdivision’s covenants, but it reversed the Intermediate Court of Appeals’ (ICA) award of attorney fees to the defendant. The core holding sets a new precedent: In assumpsit-type covenant-enforcement suits, courts must follow the parties’ specific contractual fee clause; a defendant cannot rely on the general language of HRS § 607-14 when the contract gives fees solely to an enforcing plaintiff.

2. Summary of the Judgment

• Commercial-use issue: The Court agreed with the ICA that the defendant’s “luxury vacation club” operations at Lot B did not reach the level of a “gainful occupation, profession or trade,” and therefore did not breach the Mauna Lani Resort or Pauoa Beach Declarations.
• Law-of-the-case: The circuit court was wrong to revisit covenant interpretation on remand; the ICA properly relied on its first opinion which had already defined “commercial use.”
• Appellate costs: Cost award to the prevailing defendant under HRAP Rule 39 was proper.
• Attorney fees: Reversed. Because the Declarations award fees only to those who “bring an action for enforcement” and prevail, the defendant—who merely defended—could not shift its fees. Contractual language controls even in an assumpsit-style case; HRS § 607-14 does not override the parties’ bargain.

3. Analysis

3.1 Precedents Cited and Their Influence

• Hussey v. Say, 139 Haw. 181 (2016) – Applied for “law of the case” doctrine. Once an appellate court construes a document, lower courts cannot revisit that interpretation absent extraordinary circumstances.
• Roaring Lion, LLC v. Exclusive Resorts PBL1, LLC (ICA 2013) – The first appeal in the same litigation; defined “commercial use” as activity amounting to a “gainful occupation.” Became binding law of the case.
• Gerner v. Trustees of Campbell Estate, 72 Haw. 4 (1990) – Earlier Supreme Court case holding that when a contract has a fee clause, that clause governs even in assumpsit. Reaffirmed and expanded in Cowan.
• Kona Village Realty v. Sunstone Realty Partners XIV, 123 Haw. 476 (2010) – Confirmed courts must respect parties’ fee-arbitration clause. Used to buttress freedom-of-contract rationale.
• Cooper v. Schmidt, 4 Haw. App. 115 (1983) – Previously allowed reciprocal fees despite one-way clause. Cowan expressly overrules Cooper to the extent of any inconsistency.

3.2 Court’s Legal Reasoning

3.2.1 Covenant Enforcement & “Commercial Use”

The first ICA opinion had interpreted “commercial use” in the Declarations as any use constituting a “gainful occupation, profession or trade.” The Supreme Court said the trial court, on remand, should have applied that construction and confined itself to factual findings about the extent of the defendant’s operations. Because the evidence showed transient vacation occupancy similar to permissible short-term rentals—without on-site offices, retail, or services generating separate profit—the trial court’s finding of non-commercial use stood.

3.2.2 “Law of the Case” Doctrine

Reiterating Hussey, the Court held it was error for the circuit court to reinterpret the covenants. Once an appellate mandate issues, subordinate courts lack authority to revisit questions of law decided earlier unless exceptional circumstances exist. None did.

3.2.3 Attorney-Fee Entitlement

1. HRS § 607-14 grants fees “in all actions in the nature of assumpsit and in all actions on a … contract in writing that provides for an attorney’s fee.” The statute thus distinguishes two avenues:
• General assumpsit (no contract fee clause) – courts may award up to 25 % of the judgment.
• Contract with fee clause – courts must enforce that clause; 25 % cap may still apply unless another statute lifts it.
2. Here, the Resort Declaration is a “contract in writing.” It contains a one-way fee clause: only a “person or entity” who brings an enforcement action and prevails may recover fees.
3. The defendant did not “bring” the action; it defended. Therefore, the contract deprived it of fee eligibility.
4. Because the statute applies only where the contract “provides for an attorney’s fee,” but the contract withholds fees from defending parties, § 607-14 cannot be used to rewrite the bargain.
5. Principle reaffirmed: freedom of contract is constitutionally protected; absent public-policy concerns courts will enforce bargains even if they lead to non-reciprocal fee allocation.

3.3 Impact of the Decision

• Planned community enforcement suits: Developers and associations frequently use one-way fee clauses to encourage owners to comply without deterring well-founded actions. Cowan confirms such clauses are enforceable and immune from defensive fee claims.
• Litigation strategy: Defendants in restrictive-covenant suits must now weigh the real possibility of no fee recovery even if they prevail. Settlement leverage shifts modestly toward plaintiffs.
• Assumpsit jurisprudence: Clarifies that § 607-14 is not a blanket reciprocity statute; instead, it defers to the contract when one exists. Overrules any contrary reading in Cooper v. Schmidt.
• Drafting contracts: Lawyers drafting declarations, CC&Rs, or commercial agreements can rely on asymmetric fee clauses, but must do so clearly. If reciprocity is intended, it must be stated.
• Appellate procedure: Reinforces that costs and fees are analytically distinct; prevailing defendants may still obtain HRAP Rule 39 costs even when fees are unavailable.

4. Complex Concepts Simplified

• Assumpsit: A historic common-law action for breach of a contract or promise, whether express or implied. Modernly, most contract suits are “in the nature of assumpsit.”
• Law of the Case: Once an appellate court decides a legal question, that decision binds lower courts in subsequent stages of the same case.
• One-way (or unilateral) fee clause: A contractual term granting fee recovery only to a specified side—usually the party initiating enforcement.
• Restrictive Covenants / CC&Rs: Private land-use rules recorded against property; run with the land and function like mini-statutes for the subdivision.
• Makai / Mauka: Hawaiian terms for “toward the ocean” and “toward the mountains,” useful in describing location within coastal subdivisions.
• Prevailing Party: The litigant who receives an affirmative judgment or favorable order on the main issues; may recover costs or fees when authorized.

5. Conclusion

The Supreme Court’s decision in Cowan v. Exclusive Resorts delivers two pivotal messages. First, once an appellate court interprets restrictive covenants, lower courts must honor that interpretation on remand. Second—and more lasting—contractual attorney-fee provisions dictate who may recover fees, even in assumpsit-style actions otherwise within HRS § 607-14. A defendant cannot circumvent a one-way fee clause by invoking the statute.

This precedent fortifies freedom of contract while providing clear guidance to planned communities, litigators, and courts. Fee disputes will henceforth begin—and often end—with the four corners of the governing document.