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1. Hawaiian Condominiums
In 1991, petitioners purchased a condominium at the Valley
Isle Resort on the island of Maui, Hawaii (the Maui condo). In
1992, petitioners purchased a condominium at the Wavecrest Resort
on the island of Molokai, Hawaii (the Molokai condo). Both of
these condominiums were purchased as rentals to vacationers. Each
condominium included one bedroom, one bathroom, a living room,
kitchen, dining room, and lanai.1
A. Maui Condo
As owners of the Maui condo, petitioners were members of the
Homeowners' Association at the Valley Isle Resort (Homeowners'
Association). The Homeowners' Association entered into a contract
with Rainbow Reservations, Inc. (Rainbow Reservations) to operate
the front desk for the Valley Isle Resort condominiums. Rainbow
Reservations also provided management services for individual
condominium owners. During 1993, Rainbow Reservations entered into
management contracts with owners of approximately 40 of the 120
condominium units at the Valley Isle Resort.
Generally, Rainbow Reservations provided a variety of services
for the condominium owners with whom they had management contracts,
including the rental of the condominium units, collection of rents,
after-hours front desk services, maid services, repair and
maintenance services, and redecorating services. Rainbow
1 A lanai is a Hawaiian term for a porch or veranda.
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Last modified: May 25, 2011