A court cannot rewrite an arbitrator's conclusions of law
A court cannot rewrite an arbitrator's conclusions of law
2026-09-10 · Hawaii · Courts
An arbitrator invalidated a Kauai association’s declaration amendment allowing lanai additions. The circuit court rewrote his conclusions of law and awarded the association its fees. The Intermediate Court of Appeals has vacated all of it.1
Jabre and Whitehouse v. Association of Apartment Owners of Ka‘iulani of Princeville, consolidated Nos. CAAP-24-0000490 and CAAP-25-0000396, summary disposition order filed April 29, 2026. Unpublished.
What happened below
The association amended its declaration to allow lanai additions, including support pillars, for some units. Owners challenged it. The arbitrator’s January 16, 2024 award invalidated the amendment, concluding under Penney v. AOAO of Hale Kaanapali, 70 Haw. 469 (1989), that converting common area to limited common element for one owner’s exclusive use requires a unanimous vote.
The association moved to modify for mistake of law. The circuit court granted it, rewrote conclusions 16 and 17, added new conclusions keyed to HRS §§ 514B-38(5), 514B-32(a)(11) and 514B-140(b), and awarded the association fees as prevailing party.
The holding
“It appears that the circuit court’s modifications to the arbitration award essentially sought to correct mistakes of law. HRS § 658A-24 does not authorize modification to correct a mistake of law.” Quoting Schmidt v. Pacific Benefit Services: “[W]here the parties agree to arbitrate, they thereby assume all the hazards of the arbitration process, including the risk that the arbitrators may make mistakes in the application of law and in their findings of fact.”
The court rejected the association’s inherent-powers and public-policy arguments, and expressly declined to decide whether relying on Penney was legal error at all, “as that determination is outside the scope of our judicial review under HRS § 658A-24.” The fee award fell with the judgment.
Two things this means for a Hawaii board
1. In association arbitration, an adverse award on a governance question is effectively unappealable for legal error. That changes what the process demands of a board. Arbitrator selection and the merits presentation are the whole case, not a first round with a court behind it.
There is one route out that this case did not involve: HRS § 514B-163 gives a party a trial de novo after § 514B-162 arbitration — but only on written demand served on the other parties within ten days of service of the award, with the case filed in circuit court within thirty days of that demand. Miss either deadline and the right is forfeited. And a party who demands trial de novo and does not prevail is charged with “all reasonable costs, expenses, and attorneys’ fees of the trial.”
That is the mechanism the association needed and a modification motion is not a substitute for it.
2. Penney is not dead, and a board amending a declaration should not assume it is. This is the substantive point with statewide reach.
The unresolved question underneath
Does chapter 514B’s sixty-seven-per-cent amendment threshold displace Penney’s unanimity rule when common elements are converted to one owner’s exclusive use?
The ICA observed in a footnote that the legislature “limited Penney’s application” by specifying a 67% threshold in HRS § 514B-38 — and then pointedly did not hold that Penney no longer applies. It also noted the arbitrator’s unchallenged conclusion 3, that lanai structural elements are common elements “unless they serve only one unit, in which case they are limited common elements,” could support applying Penney, and that “Penney’s applicability depends upon the specific facts of a case.”
So the state of Hawaii law is: unresolved, and fact-dependent. We are not going to pretend otherwise.
What that means before your next amendment vote
A board proposing to amend its declaration to create exclusive-use lanais, parking stalls, storage areas or yard areas for particular units should plan on the possibility that unanimity is required, not merely 67%. Concretely:
- Identify whether the conversion is unit-specific. A general amendment applying equally to all units is a different animal from one that hands specific owners exclusive use of what was common.
- Get the consent of directly affected owners regardless. Section 514B-140(b) already requires the consent of all owners whose units or appurtenant limited common elements are directly affected by a material alteration — which for a lanai addition is a meaningful list.
- Assume an owner will arbitrate it, and that whatever the arbitrator decides is what you live with.
What to watch
A published decision squarely resolving the Penney-versus-§ 514B-38 question. Until one exists, the honest description of Hawaii law here is that it is genuinely open — and that the risk falls on the association proposing the amendment.
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