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ha
€.‘J
§§
No. 28558 §
3
IN THE INTERMEDIATE coURT oF APPEALS §§
oF THE STATE oF HAWAI‘I §
19
DON INOUYE, individually and as a shareholder of
DA COMPANY INTERNATIONAL, INC., Plaintiff-Appellant, v.
GEORGE CRAIG HUGHES, DA COMPANY INTERNATIONAL, INC.,
a Hawaii corporation, Defendant-Appellee
APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CIVIL NO. 05-l~l922)
SUMMARY DISPOSITION ORDER
(By: Nakamura, Chief Judge, Foley and Leonard, JJ.)
Plaintiff-Appellant Don Inouye (Inouye) appeals from
the Circuit Court of the First Circuit's (Circuit Court's) May
entered against Inouye and in favor of
l8, 2007 Final Judgment,
after a non-jury
Defendant-Appellee George Craig Hughes (Hughes)
trial.1
This case arises out of a dispute between Inouye and
Hughes concerning the ownership and management of a Waikiki beach
Inouye contends he owned fifty percent of the
concession stand.
Hughes claims that the concession was at
concession business.
all relevant times wholly owned and operated by his company HSI
dba Prime Time Sports (PTS), and that Inouye
Hughes also claims that Da
Manufacturing, Inc.,
acted solely as an employee of PTS.
a corporation formed by Inouye, was merely a
Company, Inc.,
vehicle to divide the profits from concession business pursuant
to an agreement between Hughes and Inouye that they would split
those profits evenly, after PTS was reimbursed for payroll and
other expenses.
The parties had a falling out in early 2005; when
Inouye asserted and Hughes denied that Inouye owned half of the
1/ The Honorable victoria S. Marks presided.
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concession business. Hughes withdrew the funds in Da Company's
checking account. Inouye left the business and demanded an
accounting and a resolution of his ownership claim. According to
the Circuit Court's post-trial findings of fact, Hughes then
discovered that Inouye had diverted jet ski and parasail business
away from Hughes's concession to another company, Beautiful Day
Tours (BDT), that was owned by Inouye. Hughes also discovered
that Inouye had failed to reimburse PTS for "borrowed labor" used
at the concession, which resulted in the profits of the
concession business being inflated.
After an apparently failed mediation, in October 2005,
Inouye filed a ten-count complaint, seeking relief for:
(l) Conversion of cash and other assets belonging to
Da Company;
(2) Theft of corporate opportunity;
(3) Breach of Hughes's alleged fiduciary duty to
Inouye as a co-owner of Da Company;
) An accounting of Da Company's financial records;
(5) Unjust enrichment;
(6) Derivative claims, as a shareholder of Da Company;
(7) Judicial dissolution of Da Company;
(8) Misrepresentation related to the mediation wherein
the parties allegedly reached a tentative agreement, which was
followed by Hughes's claim to a bonding company alleging that
Inouye had embezzled money;
(9) Defamation relating to Hughes's published claim of
embezzlement by Inouye; and
(lO) Punitive damages.
Following completion of the trial, on May l, 2007, the
Circuit Court entered its Findings of Fact, Conclusions of Law,
and Order in favor of Hughes and against Inouye on Counts I-III,
V, VI, and VIII-X. Regarding Count IV (accounting), the court
concluded that Inouye owed Hughes $3,832.04. Regarding Count
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VII, the court ordered that Da Company, Inc. be dissolved. The
Circuit Court also awarded Hughes attorney's fees in the amount
of $26,439 50 and costs totaling $3,022.94. On May 23, 2007,
Inouye timely filed an appeal from the Circuit Court's May l8,
2007 Final Judgment.
On appeal, Inouye alleges that the Circuit Court made
"numerous" factual and legal errors in its decision. More
specifically, Inouye raises five points of error on appeal:
(1) The Circuit Court erred when it found that Inouye
had no ownership interest in the concession business, and that
the concession business was always owned and operated by PTS.
Inouye also alleges error in the Court's finding that all of
Inouye's actions regarding the concession business were done in
his capacity as an employee of PTS;
(2) The Circuit Court erred when it concluded that
Inouye should have helped himself to Da Company books and assets
once Inouye learned that his ownership in the concession was
being disputed;
(3) The Circuit Court erred when it found that Inouye
failed to properly reimburse PTS for borrowed employee expenses;
(4) The Circuit Court erred when it found that Inouye
diverted jet ski and parasail revenues from PTS to his own
company, BDT; and
(5) The Circuit Court erred as a matter of law when it
awarded Hughes attorney's fees pursuant to Hawaii Revised
Statutes (HRS) § 607-l4.
Upon careful review of the record and the briefs
submitted by the parties and having given due consideration to
the arguments advanced and the issues raised by the parties, we
resolve Inouye's points of error as follows:
(l) Inouye contends that the Circuit Court's finding
that he had no interest in the Waikiki concession business was
clearly erroneous and against the clear weight of evidence. As
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Inouye admits, the Circuit Court's findings are "consistent with
and supported by Hughes's written and oral testimony." Hughes
testified, inter alia, that: (a) Inouye and Hughes never had a
deal or understanding that they were partners; (b) at all
relevant times, Inouye was solely acting as an employee of PTS;
(c)_the sole purpose of Da Company was to allow Inouye to share
in the profits from the concession; and (d) the concession was
always a PTS concession, which was manned and controlled by PTS
employees.
Although Hughes's testimony contradicts testimony by
Inouye and other witnesses called by Inouye, it nonetheless
provides substantial evidence to support the Circuit Court's
findings because such evidence could enable a person of
reasonable caution to support the Circuit Court's finding. §§§,
e.q., Beneficial Hawai‘i, Inc. v. Kida, 96 Hawai‘i 289, 305, 30
P.3d 895, 911 (200l). It is well-established that "the
credibility of witnesses and the weight to be given their
testimony are within the province of the trier of fact and,
generally, will not be disturbed on appeal." §§§, §;g4,
Tamashiro v. Control Specialist, Inc., 97 Hawafi 86, 92, 34 P.3d
16, 22 (200l). Upon review of the entire record, we conclude
that the Circuit Court's findings concerning the ownership of the
concession business were not clearly err0neous.
(2) In Inouye's second point of error, he takes out of
context the Circuit Court's last sentence of its fourth
conclusion of law. The Circuit Court's third and fourth
conclusions of law state:
3. Inouye's conversion claim (Count I) is dismissed. He
claimed that Hughes took certain items (e.g.,
refrigerator, flat screen television) which belonged
to him as well as certain unidentified books and k
records belonging to Da Company. He also claimed that
Hughes took monies belonging to Da Company.2
2 This allegation will be addressed in
connection with Count IV re: accounting.
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4. Inouye failed to prove the [sic] Hughes or someone at
his direction or PTS took the television or documents
that belonged to anyone other than PTS. At most,
someone received a refrigerator from PTS Stand I at
the Hale Koa Hotel. More0ver, with respect to the
storage room at the Waikiki Shores, Inouye had the
keys and Hughes never deprived him of access to the
room.
Inouye claims that the final sentence above, along with
Hughes's testimony that upon discovering that his ownership
interest was disputed, Inouye "had three months to remove
whatever he thought Da Company owned," amounts to a legal
conclusion that Inouye should have "helped himself" to Da Company
assets. This skewed view of the Circuit Court's conclusion is
without merit. The Circuit Court was merely explaining why
Inouye's conversion claim failed. In its fourth conclusion of
law, the Circuit Court simply concluded that Hughes did not
convert assets of Da Company by affirmatively removing them from
the storage room, nor did he convert such assets by depriving
Inouye of access to them.
(3) Inouye contends that the Circuit Court clearlyr
erred when it found that Inouye did not sufficiently reimburse
PTS for borrowed labor utilized at the concession stand.
Although conflicting evidence was presented by Inouye, the
Circuit Court's finding is sufficiently supported by the record
on appeal,
In his direct testimony, Hughes described the
circumstances surrounding Inouye's failure to reimburse PTS for
borrowed labor used at the Waikiki Shores concession. Hughes
testified that the concession business had not been sufficiently
reimbursed for employee hours, and that Inouye's compensation was
unjustly inflated as a result. Hughes averred that PTS was
under-reimbursed by approximately $l8,000.00.
Hughes's testimony provides substantial evidence to
support the Circuit Court's finding that Inouye did not properly
reimburse PTS for employee expenses. Upon review of the entire
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record, this court is not left with a definite and firm
conviction that a mistake has been made. §§e §iQa, 96 Hawafi at
305, 30 P.3d at 911. Inouye concedes that the finding was
supported by Hughes's testimony, but argues that the finding was
against the clear weight of the evidence. Because the task of
weighing conflicting evidence and the relative credibility of the
witnesses is within the province of the trial court, and the
court's finding is supported by substantial evidence, we conclude
that the Circuit Court did not clearly err in its finding that
Inouye insufficiently reimbursed PTS. h
(4) Inouye contends that the Circuit Court clearly
erred when it found that Inouye had improperly diverted jet ski
and parasail business away from PTS and to his own company, BDT.
The Circuit Court's finding is supported by substantial evidence
presented to the court, Hughes testified, inter alia, that,
following the Hale Koa Hotel's request to send military jet ski
and parasail business to that hotel, all civilian parasail and
jet ski business was supposed to be sent to the Waikiki Shore
concession, and that Hughes instructed PTS employees to direct
such business accordingly. Hughes further testified that,
instead of sending civilian jet ski and parasail business to
PTS's concession, Inouye directed such business to BDT. A1though
conflicting with Inouye's testimony, Hughes's testimony
sufficiently supports the Circuit Court's finding, which we
conclude is not clearly erroneous.
(5) Inouye argues that the Circuit Court erred, as a
matter of law, when it awarded attorney's fees to Hughes pursuant
to HRS § 607-14 because this suit is not an action in assumpsit.
In the first instance, we note that Inouye wrongly urges this 9
court to review the award of attorney's fees de novo, rather than
using the abuse of discretion standard. See, e.q., Sierra Club
v. Dep't of Transp. of the State of Hawafi, 120 Hawafi 181, 197,
202 P.3d 1226, 1242 (2009) ("The trial court's grant or denial of
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attorney's fees and costs is reviewed under the abuse of
discretion standard.") (internal quotation marks, citations, and
brackets omitted). Nevertheless, we conclude that the Circuit
Court abused its discretion in granting attorney's fees to Hughes
in this case. 4
In TSA Int'l, Ltd. v. Shimizu Corp , 92 Hawafi 243,
263, 990 P.2d 713, 733 (1999) (citations omitted) (emphasis
added), the Hawaifi Supreme Court set forth the following general
principles related to the recovery of attorneys' fees:
General1y, under the "American Rule," each party is
responsible for paying for his or her own litigation
expenses. A notable exception to the "American Rule,"
however, is the rule that attorneys' fees may be awarded to
the prevailing party where such an award is provided for by
statute, stipulation, or agreement.
In the present case, the statutory exception to the
"American Rule" relied on by the Circuit Court is HRS § 607-14
(Supp. 2006) (emphasis added), which provides in relevant part:
§ 607-l4. Attorneys' fees in actions in the nature of
assumpsit, etc. In all the courts, in all actions in the
nature of assumpsit and in all actions on a promissory note
or other contract in writing that provides for an attorney's
fee, there shall be taxed as attorneys' fees, to be paid by
the losing party and to be included in the sum for which
execution may issue, a fee that the court determines to be
reasonable; provided that the attorney representing the
prevailing party shall submit to the court an affidavit
stating the amount of time the attorney spent on the action
and the amount of time the attorney is likely to spend to
obtain a final written judgment, or, if the fee is not based
on an hourly rate, the amount of the agreed upon fee. The
court shall then tax attorneys' fees, which the court
determines to be reasonab1e, to be paid by the losing party;
provided that this amount shall not exceed twenty-five per
cent of the judgment,
As the supreme court has often stated:
'Assumpsit' is a common law form of action which allows for
the recovery of damages for non-performance of a contract,
either express or implied, written or [oral], as well as
quasi contractual obligations.
Kahala RoVal Corp. v. Goodsi1l Anderson Quinn & Stifel, 113
Hawafi 251, 281, 151 P.3d 732, 762 (2007) (citations omitted).
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In Kahala Royal, the court explained:
In ascertaining the nature of the proceedings on
appeal, this court has looked to the essential character of
the underlying action in the circuit court.
The character of the action should be determined from
the facts and issues raised in the complaint, the nature of
the entire grievance, and the relief sought. Where there is
doubt as to whether an action is in assumpsit or in tort,
there is a presumption that the suit is in assumpsit.
Further, a plaintiff's prayer for attorney fees is a
significant indication that the action is in assumpsit.
In addition, the manner in which the plaintiff has
characterized the action may also be accorded some weight.
ld; (citations, brackets, elipses, and internal quotation marks
omitted; format altered).
In the case at bar, Inouye did not seek to collect
money damages based on breach of contract, ‘Instead, Inouye
alleged that Hughes converted Inouye's property and moneys,
usurped Inouye's corporate opportunity, breached a fiduciary duty
owed to Inouye as a business partner, unjustly enriched himself
at Inouye's expense, made actionable misrepresentations, and
defamed Inouye. These causes of action sound in tort and
restitution.2 In addition, Inouye raised "derivative claims" on
behalf of Da Company, sought an accounting of the parties'
respective interests in the business, and sought punitive damages
and a dissolution of Da Company, The Circuit Court rejected
Inouye's claims, and instead adopted Hughes's view that the
parties' relationship was merely that of an employer-employee.
Nevertheless, based on the factual allegations and issues raised
in the complaint, the essential character of this action is that
Hughes wrongly took property, money, and business opportunities
that belonged to Inouye. Inouye did not assert claims for breach
3/ §§§ generally REsnmEMmmr(SEcmmn 0F Tmws § 222A (Conversion), § 525
et seq. (Misrepresentation), § 558 et seq. (Defamation) (l965); TSA Int'l Ltd.
v. Shimizu Corp., 92 Hawafi at 264, 990 P.2d at 734 (breach of fiduciary duty
sounds in tort); Meridian Mortq., Inc. v. First Hawaiian Bank, 109 HawaiH 35,
47, 122 P.3d 1133, 1145 (App. 2005) (discussing tort of interference with
prospective business advantage); Durette v. Aloha Plastic Recyclinq, Inc., 105
HawaiH 490, 502-04, 100 P.3d 60, 72-74 (2004) (distinguishing a claim for
unjust enrichment, based on principles of restitution, from claims sounding in
contract or tort).
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of a contract, express or implied. The mere fact that Inouye's
claims relate to a contractual or quasi-contractual relationship
‘between the parties does not render the dispute between the
parties to be in the nature of assumpsit. Accordingly, we
conclude that the Circuit Court abused its discretion in granting
an award of attorney's fees to Hughes pursuant to HRS § 607-14.
For the foregoing reasons, the Circuit Court's May 18,
2007 Final Judgment is affirmed in part and reversed in part.
The Circuit Court's award of attorney's fees to Hughes in the
amount of $26,439.50 is reversed. 1n all other respects, the
Circuit Court's May 18, 2007 Final Judgment is affirmed.
DATED= Honolulu, Hawai‘i, June 29, 2010.
On the briefs: § ' % 6
Seth M. Reiss Chief Judge
for Plaintiff-Appellant <:;z%4éD¢§7 -
;‘ / x '
Richard E. Wilson `» ” /Z?¢¢::A
for Defendant-Appe1lee Associate Judge