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lN THE SUPREME COURT OF THE STATE OF HAWAlT
~--ace--~
KOGA ENGlNEERlNG & CONSTRUCTlON, INC., _
Petitioner/Plaintiff~Appelleel
.-
Respondent a
VS.
STATE or HAWA:‘I,
Petitioner & Respondent/Defendant~Appellant
NO. 28278
CERTlORARl TO THE lNTERMEDIATE COURT OF APPEALS
(CIV. NO. 01-l~3636-l2(VSM))
JANUARY l4, 2010
MOON, C.J, NAKAYAMA, ACOBA, AND DUFFY, JJ., AND
ClRCUIT JUDGE KlM lN PLACE OF RECKTENWALD, J., RECUSED
OPINION OF THE COURT BY ACOBA, J.
2009, both Petitioner & Respondent/
On July 8,
and Respondent &
Defendant-Appellant State of Hawafi (the State)
Petitioner/Plaintiff-Appellee Koqa Engineerinq & Construction,
Inc. (Koga) filed separate Applications for Writ of Certiorari,1
1 Pursuant to Hawafi Revised Statutes (HRS) § 602~59 (Supp. 2008),
a party may appeal the decision of the intermediate appellate court (the ICA)
only by an application to this court for a writ of certiorari. §§§ HRS § 602-
to accept or reject the application for writ of
59(a). ln determining whether
the lCA decision for:
certiorari, this court reviews
of law or of fact; or
(continued...)
(l) Grave errors
93 =Z §~!d *!l ?%VI`@H¥Z
£3EZ7l§
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requesting that this court review the judgment of the
lntermediate Court of Appeals {the ICA} filed pursuant to its
March l3, 2009 Summary Disposition Order (SDO)? affirming in part
and reversing in part the 0ctober 24, 2006 final judgment of the
3
circuit court of the first circuit (the court). §ee Koga Eng'g
& Const., Inc. v. State, No. 2B278, 2009 WL 64l46l, *l (Haw. App.
Mar. l3, 2009). 0n July 23, 2009, Koga filed a Response to the
State’s Application (Koga’s Response), and on the same day, the
State filed a Response to Koga's Application (State's Response).
On August 27, 2009, Koga filed a supplemental memorandum as
requested by this court’s order filed on August l2, 2009. This
court held oral argument on October l3, 2009.
0 Briefly, this case involved a construction contract
dispute. The court denied the State’s motion for summary
judgment on the ground that Koga’s claim for damages was
untimely, but granted Koga’s motion for partial summary judgment
to the effect that its late claim for damages was not barred
under the contract. The case proceeded to a bench trial on the
issue of damages. The court inter alia concluded Koga was
entitled to damages and payment of that part of the contract
‘(...continued)
(2) Obvious inconsistencies in the decision of the [ICA]
with that of the supreme court, federal decisions, or
its own decision,
and the magnitude of those errors or inconsistencies
dictating the need for further appeal.
HRS § 602-59(b). The grant or denial of a petition for certiorari is
discretionary with this court. See HRS § 602-59(a).
2 The SDO was filed by Presiding Judge Daniel R. Foley and Associate
Judges Alexa D.M. Fujise and Katherine Leonard.
3’ The Honorable Victoria S. Marks presided.
2
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price retained because of incomplete work. The court issued
final judgment in favor of Koga. 0n appeal, the lCA affirmed the
court’s final judgment, except as to the portion regarding
retainage. Part l of this opinion relates the relevant facts in
this case. Part ll addresses the State’s Application, which
asserts that the lCA gravely erred in upholding the court's
denial of its motion for summary judgment. Part lll addresses
Koga’s Application, which maintains that the lCA erred in
reversing the court’s final judgment on the retainage issue. As
to Part ll, we hold that the court was wrong in granting Koga’s
motion for partial summary judgment but right in denying the
State’s motion for summary judgment, inasmuch as there were
genuine issues of material fact as to the question of prejudice.
The case with respect to damages is remanded for trial. As to
Part lll, we hold that the court lacked jurisdiction to consider
the retainage fee, inasmuch as the retainage claim must be
processed through HRS chapter l03D as noted herein.
E4HRT I
l.
A.
l.
0n July l8, l997, Koga entered into a contract4 with
4 The contract consisted of several documents, including a document
entitled “Standard Specifications For Road, Bridge, and Public Works
Construction l994,” (Standard Specifications) and a document entitled “Special
Provisions Proposal Contract and Bond l997” (Special Provisions). The Special
Provisions, which were signed by both parties, contained amendments to certain
sections of the Standard Specifications, including section l05.l8, which is
relevant to this case. lt is undisputed that section l05.l8 of the Special
Provisions controls in this case. Collectively, these documents will be
referred to as “the contract.”
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the State to widen a road in Hilo, Hawaiii {the Project}.5 ln
relevant part, the contract provided as follows with respect to
damages:“
l05.lB Claims for Adjustment and Disputes. The Contractor
may give notice in writing to the Engineer for claims that
extra ccmpensation, damages, or an extension of time for
completion is due the Contractor for one or more of the
following reasons:
(l) Reguirements not clearly covered in the contract, or not
ordered by the Engineer as an extra work;
(2) Failure between the State and the Contractor to an
adjustment in price for a contract change order issued by
the State;
(3) An action or omission on the part of the Engineer
requiring performance changes within the scope of the
contract.
The Contractor shall continue with performance of the
contract in compliance with the directions or orders of the
Engineer, but by so doing, the Contractor shall not be
deemed to have prejudiced any claim for additional
compensation, damages, or an extension of time for
completion, provided:
(l) The notice in writing be given:
(a) Before the commencement of the work involved, if at that
time the Contractor knows of such reguirements or the
occurrence of such act or omission; or
(b) Within 30 calendar days after the Contractor knows of
such reguirements or the occurrence of such action or
omission if the Contractor did not have such knowledge
before the commencement of the work; or
(c) Within 30 calendar days after receipt of the written
contract change order that was not agreed upon by both
parties; or
(d) Within such further time as may be allowed by the
Engineer in writing.
(2) The notice shall clearly state the Contractor's
intention to make claim and the reasons why the Contractor
believes that additional compensation changes or an
extension of time may be remedies to which the Contractor is
entitled; and afford the Engineer every facility for the
keeping of records of the actual cost of work. Failure on
c
“ As discussed further infra, this case proceeded to a bench trial
after the court denied the State’s motion for summary judgment. The court
made findings of fact (findings), and some of facts related herein are based
on the uncontested findings of the court at trial.
5 More specific facts with respect to the retainage issue are
recounted in Part lll, »
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the part of the Contractor to give such notification or to
afford the Engineer proper facilities for keeping strict
account of actual cost shall constitute waiver of the claim
for such extra compensation, The filing of such notice by
the Contractor and the keeping of the costs by the Engineer
shall not id any way be construed to prove the validity of
the claim.
The Engineer will review the notice and render a decision.
The Engineer's decision shall be final and conclusive
unless, within 30 calendar days from the date of the
decision, the Contractor mails or otherwise furnishes a
written appeal to the Director. The decision of the
Director shall be final. Later notification of such claims
shall not bar the Contractor’s claim unless the State is
prejudiced by the delay in notification. No claim by the
Contractor for an adjustment hereunder shall be allowed if
notice is not given before final payment under this
contract. Any adjustment in the contract price pursuant
this clause shall be determined according to Subsection
l04.09-~Price Adjustment.
(Emphases added.)
Based on plans provided by the State, Koga prepared an
“Original Project Schedule” which called for completion of the
work in three phases, known as Phases l, ll, and lll. As part of
the work, Koga was required to install a “drain line.” The
0riginal Project Schedule called for “the installation of a
waterline” in Phase ll of the Project, but not in Phase l. 0n
September 8, l997, the State issued a letter to Koga stating that
it was “hereby given notice to proceed as of September l5, l997,
and to complete the project on or before December 2, 1998 [(First
Notice to Proceed)].”
According to the State, “[t]he controversy arose as a
result of an error in the State's construction plans.” 0n
September 8, l997, “prior to the commencement of its work on the
Project,” Koga discovered a “discrepancy” in the plans between
the “proposed installation of the new drain line” and an existing
waterline. The existing waterline, which lay “in the exact
location where the new drain line was to be installed” and “ran
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for nearly the entire length of Phase I{,]” was not shown on the
State's plans. During “the first week of October l997,” “Koga
commenced with work on the water system in Phase lI[.}”
As a result of the discrepancy, the existing waterline
needed to be relocated, and on Octoher 2G, l997, Koga
“submitt{ed] a cost proposal{7} to relocate the existing il
waterline” in Phase l. in its cost proposal, Koga stated that
“{t]he total cost [to relocate the existing waterline] amounts to
[$363,587].” To the cost proposal, Koga attached a “breakdown”
from which the total amount was derived. The breakdown contained
categories for “quantity,” “new unit price,” and “total this
item,” which was obtained by multiplying the quantity and new
unit price. There was no category for “labor,” or any other
costs.
The amount in the cost proposal was “incorporated
directly into” a change order, known as Change Order No. 5,
authorizing Koga to commence work on relocating the existing
waterline. On February 26, l998, “[f]unding for Change Order No.
5 work was approved and the State issued its Notice to Proceed
[(Second Notice to Proceed)] on the waterline work in Phase I[.]”
Change Order No. 5 was executed by Koga on March 8, l998. In the
meantime, Koga had been working on other phases of the project.
On April l5, l998, the State and Koga agreed to a contract
7 In its Answering Brief, Koga pointed out that the court found that
in the deposition of Salvador Panem (Panem), the Project Engineer for the
Department of Transportation, "he admitted that there was nothing in Koga's
cost proposal . . . that indicated that indirect costs and indirect impacts
from delay and disruptions was included in Koga's cost proposal."
6
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amendment {Contract Amendment No. ll that increased the total
contract price to reflect “Contract Change Orders” issued by the
State, as well as “other overruns.” @n August 6, l999, the State
and Koga agreed to a second contract amendment {Contract
Amendment No. 2) for the same reasons. lt is not clear whether
these amendments included a change in price as a result of Change
Order No. 5.
On March 24, 2GOO, Koga submitted a “claim for
additional compensation” to the State (“Claim”). ln regard to
notice, Koga's Claim stated that “[f]rom about March 8, l998 to
May 26, l999, [] Koga had repeatedly put the State on notice of
the damages to Koga which had not yet been quantified and which
were directly caused by the unanticipated discovery of the
[waterline].”8 As to written notice, Koga stated that “on May
26, l999, Clay Asato of Koga provided written notice to Howard
Haymore of [the State (May 26, 1999 Asato letter)] that Koga
would be submitting a claim for equitable adjustment to the
State[.]”9 Koga argued that it was entitled to extra
compensation and damages for three reasons: (l) the State’s plans
were inaccurate, which caused a change in the design and scope of
work, (2) the State failed to grant double shifts and night work,
and (3) the State’s suspension of work due to unsuitable weather
was unjustified. Koga claimed that it was due extra compensation
8 Koga argued that Change Order No. 5 “provided no payment for the
costs of overhead, labor, material and utilities{.]”
9 The May 26, 1999 Asato letter does not appear to be part of the
record in this case.,
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and damages in the amount of $l,l38,043. Rather than setting
forth a specific amount in regard to each reason in its Claim,
Koga used a “‘total cost’ method” because, inter alia, its
“{s]pecific costs [were] impossible or extremely impracticable to
"'ll
ascertain[.j
2.
On September l, 2000, the State, in a decision by.
HawaFi District Engineer Stanley Tamura (the Engineer), denied
Koga's Claim (the Engineer’s Denial). ln relevant part, in the
Engineer's Denial, the Engineer rejected Koga’s Claim as to
Koga's first reason on the merits as follows:
The plans are not improper in that it states
that the location of the existing waterline is
approximate. Also, the State did not suspend contract
work at any time.
The “original” schedule, which was submitted on or
about September 4, l997, was not formally reviewed by the
State. The Notice to Proceed[w] is not contingent on
review of the schedule. Prior to the final review of the
“original” schedule, the existing l8" waterline was located
and Koga's project personnel agreed that starting work on
Phase ll instead of Phase l would not impact their work.
Koga then resubmitted [its] schedule showing [its] agreement
to start on the Phase ll work. This schedule was “Reviewed”
by the State on November l4, l997. No mention of a claim
was made at this time. ~
Contract Change Order No. 5 addresses all costs
(direct and indirect) for relocating the existing waterline.
lndirect costs are customarily included in the unit or lump
prices for each contract and extra work item. Therefore,
Koga was compensated for indirect costs. Furthermore, Koga
was compensated for additional costs. The unit price to
install the extra work lB" waterline is l4.8% more than the
contract unit price for almost identical l8" waterline work.
Based on the above, we feel Koga’s [C]laim is not
justified.
(Emphases added.) As to Koga's second and third reasons, the
Engineer also addressed them on their merits, stating that (l)
w lt is not clear whether the Engineer was referring to the First or
Second Notice to Proceed.
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“{tlhe State is not obligated to approve double shifts or night
work{,]” and (2) Koga was “given the opportunity to ‘standby’
until the weather cleared.” ln his analysis of Koga’s second and
third reasons for receiving damages, the Engineer made no
reference to any failure on the part of Koga to provide notice to
the State.
On September 29, 2000, Koga appealed the Engineer’s
decision to the Department of Transportation. ln regard to the
statement in the Engineer’s Denial that “[n]o mention of a claim
was made at this time,” Koga argued that the State did in fact
have notice of Koga’s Claim:
ln fthe Engineer’s Deniall, Lthe Engineerj stated that
“No formal mention of a claim was made” at or around the
time the State reviewed the revised schedule by Koga
{November of l997). Thus, the State is seemingly raising
Koga’s apparent failure to provide written notice of its
claim as an affirmative defense. As discussed more fully
below, Koga's apparent failure within the time period
provided for written notice should be excused asc (l) the
State was orally advised of the basis of Koga’s claim and
therefore had actual notice of Koga's claim;“ and (2) the
State was not prejudiced by Koga’s alleged failure to
provide written notice.
Assuming arguendo that fthe May 26, l999] letter did
not satisfy the written notice requirement of Section lO5.l8
of the contract , the pertinent facts . . . indicate that
the State had actual knowledge of the circumstances that
form the basis of Koga's claim and/or were {sic] gg;
prejudiced by the lack of notice.
(Emphases added.)
On June 29, 200l, Deputy Director Jadine Urasaki (the
Director) denied Koga's appeal. On the issue of notice, the
Director stated in relevant part as follows:
Koga never submitted any contemporaneous written notice of a
claim on account of the potential disruption or potential
n Koga has not argued that it actually orally advised the State that
it was going to bring a claim. Rather, it argues that it “orally advised the
State of the basis of Koga’s claim,” i e., it told the State that the plans
were inaccurate.
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impact due to the problems with relocating the §§
waterline{.]
On the failure to provide written notice, Koga seeks
to get out of the ccntract's notice requirements by alleging
that notice was excused because: ill oral notice was given;
and (2} the State was not prejudiced by the lack of written
notice.
The claim letter basically admits at page 12 that
written notice of a potential claim was not provided to the
State until May 26, l999. Note that this is the first time
Koga mentions any written notice to the [Sltate on all three
claim items--the waterline discovery, failure to approve
night work, and suspensions due to inclement weather.
Koga's discussion of the facts surrounding the
supposed oral notice . . . only serves to show that the
State was aware of the facts of the waterline discovery and
that some of the work had to be resequenced. lt shows no
notice of a claim. ln addition, it shows no notice of any
dissatisfaction, much less a claim, due to denial of extra
shifts or due to suspensions on account of inclement
weather.
Furthermore, the State did not have actual notice of a
potential claim due to the waterline. To the contrary, Koga
was imparting to the State that there would be no claim.
The schedule was redone and resubmitted without notice of a
claim. Change Order No. 5 was negotiated and executed
without notice of a claim. Since these events took place
well after the discovery of the waterline location problemL
one would think that by that time Koga would have some idea
that there would be a claim--yet it said nothing. ln
addition, the appeal letter is completely silent on alleged
actual notice of a claim situation surrounding denial of
extra work or suspensions due to weather.
(Emphases added.) The Director also addressed the merits of the
arguments raised in Koga’s appeal of the Engineer’s Denial,
concluding that no basis for granting Koga’s request for
increased compensation and damages was shown.
B.
l.
On December 26, 200l, Koga filed its Complaint against
the State. Koga alleged several counts in its Complaint,
including that the State had breached the contract by “fail{ing]
to compensate Koga for its increased costs . . . as a result of
the defective Project plans” and that the State had “breach[ed aj
duty of cooperation” by “refus[ing] Koga's reasonable request to
lO
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mitigate the effects of the defective Project plans by working
double shifts.” Koga stated that “[t}he modified total cost for
the Pr@;\@cr . . . is $:@543',339.00.”
2.
a.
On August 22, 2003, the State filed a motion for
summary judgment, arguing that “[t}here [was] no dispute that
[Koga] failed to provide the notice required by the contract.”
Referencing section l05.l8 I 2(l)(b) of the contract, the State
claimed that “[t]here is no question that [Koga] did not submit
any written claim for additional compensation within 30 days of
the waterline discovery.”” According to the State, Koga had
acknowledged in its March 24, 2000 claim that its claim was
untimely “by claiming that it provided [the State] with ‘oral and
actual notice[,]’” and that “even if the State had oral and
actual notice that an existing waterline was not shown in the
plans, this is not the same . . . as receiving notice of [Koga’s]
intent to file a claim for additional . . . compensation.”
The State also argued that Koga’s “failure to comply
with the contract's notice provisions . . . caused severe
prejudice to the State” because “the State could have explored
alternatives” or “monitor[ed] the costs that [Koga] would claim
as its damages[] as the work progressed.” The State acknowledged
“ In a footnote, the State asserted that “[i]t is eminently arguable
that section l05.l8 [I 2] {l)(a) of the contract, which provides that notice
must be given ‘[b]efore the commencement of the work involved,' should be
applied[.]” According to the State, “even giving [Koga] the benefit of the
doubt . . . and allowing [it] the 30 day period, there is no question that
[Koga] failed to comply with the notice requirements.”
ll
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that Koga had raised “a need to work double shifts” in its
Complaint, but the State made no separate argument about notice
in regard to this claim.
b.
On September 22, 2003, Koga filed a memorandum in
opposition to the State’s motion for summary judgment (Koga's
memorandum in opposition) in which it presented several
arguments. ln relevant part, Koga claimed that because the State
denied the March 24, 2000 claim “on the merits and did not
expressly reserve the right to rely upon Koga's failure to
provide timely written notice in defending against Koga’s claim
for additional compensation, the State effectively waived any
failure on the part of Koga to provide prompt written notice.”
Additionally, Koga maintained that the State was not
prejudiced because “the State was aware of the facts supporting
Koga’s claim for additional compensation[,]” “Change Order No. 5
was restricted to direct costs and cannot be construed as
constituting a waiver of Koga's [March 24, 2000] claim,” and the
State had breached the contract by providing inaccurate plans,
Koga did not separately address any of the reasons for extra
compensation and damages that it had provided in its March 24,
2000 claim.
3.
a.
0n August 26, 2003, Koga filed a motion for partial
summary judgment which substantially tracked its memorandum in
opposition; As to whether it had complied with the contract’s
l2
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written notice requirements, Koga stated that “{i]n the present
oase, the State was provided with written notice of Koga’s claim
in Clay Asato's letter dated May 26, l999.”
Although Koga argued that the May 26, l999 Asato letter
“would satisfy the written notice requirement as provided in
Section l05.l8 of the Standard Specifications{,]”H it did not
argue that the May 26, 1999 Asato letter had been received within
the deadlines set forth in the contract. Koga asserted that
“[a]ssuming arguendo that [the May 26, l999 Asato] letter did not
satisfy the written notice requirement of [s]ection l05.l8 of the
Standard Specifications, Koga may argue that its apparent failure
to provide notice within the specified time period should be
excused” because “the State had actual and constructive notice of
the additional work and was not prejudiced by the delay[.]”
b.
On September 22, 2003, the State filed a memorandum in
opposition to Koga's motion for partial summary judgment (State’s
memorandum in opposition). As to Koga’s assertion that the Asato
letter satisfied the written notice reguirement, the State noted
that the Asato letter was not included by Koga as an exhibit, and
that “there [was] no question that the letter was untimely.” The
State also separately addressed all three of the reasons provided
by Koga in its Claim. ln regard to each reason, the State
utilized the May 26, 1999 Asato letter as the “earliest” date of
m Although Koga uses the term “Standard Specifications,” it is
assumed that it is referring to the contract, inasmuch as section l05.l8 of
the Standard Specifications does not control in this case.
13
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“{Koga's} claim.” As to the inaccurate plans, the State argued
that “{t]he inaccuracy of the State’s plans was discovered by
Koga on September 8, l997. . . . if {Koga} wanted to make a
claim for additional compensation because of a defect in the
plan, [it} was required to provide notice of the claim by
October 8, l997.””
The State also argued that “[t}here {was] no showing
why the State should be charged with actual notice of a claim.
The state representatives on the job were never informed prior to
May l999, either orally or in writing, that Koga was incurring
additional delay and impact costs.” Finally, the State argued
that it had been “prejudiced by the lack of timely notice[,]” and
that it had not breached the contract as alleged by Koga. 1
c.
On September 25, 2003, Koga filed a reply to the
State's memorandum in opposition (Koga’s reply). In substantial
part, Koga reiterated the arguments made in its motion for
summary judgment and memorandum in opposition. Koga did not
address the individual arguments made by the State in regard to
the waiver of the three reasons for additional compensation and
damages set forth in its Claim.
“ As to the State's refusal to allow Koga to work double shifts, the
State maintained that Koga's last request to work double shifts was submitted
on “October 28, l998. . . . Accordingly, if [Koga] wanted to make a claim for
additional compensation as a result of the State’s denial of the double shift
request, the claim for the last request should have been filed by November 27,
l99B.” ln regard to the State’s suspension of work due to weather, the State
argued that this reason was “no longer at issue. {Koga] has adopted the
report of Herbert Chock [(Chock)] to itemize it (sic] damages.
[(Chock)] testified that he was not challenging any of the [S}tate {sic}
determinations regarding the weather delays.”
l4
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4.
On October l5, 2003, the court issued an order denying
the State’s motion for summary judgment and an order granting
Koga’s motion for partial summary judgment (collectively, “the
Summary Judgment Order”). in relevant part, the court stated
that the State had waived the written notice requirement and was
not prejudiced by the failure to provide timely written notice:
in denying the State's Motion for Summary Judgment,
the [c]ourt recognizes the well settled rule that a
contractor's failure to comply with the written notice
requirement is hereby waived if the contracting officer and
the head of the awardinq_department considers and denies a
contractor's claims on its merits without raising the issue
of the contractor's failure to provide prompt written notice
as a basis for the denial of the claim.
fn regards to Koqa's [Cllaim dated March 24, 2000
., the fclourt hereby finds that the State failed to base
its denial of Koga's Claim dated September l, 2000 on Koqa's
failure to provide timely written notice. Accordingly, the
{c]ourt hereby finds that the State waived any failure on
the part of Koga to comply with the written notice
requirement when it analyzed and reached a decision upon
Koga’s [C]laim on its merits,
Additionally, the [c]ourt hereby finds that any
failure on the part of Koga to provide written notice of its
claim for additional compensation is excused as the State
was aware of the underlying facts relating to Koga's Claim
and was not prejudiced by Koqa's alleged failure to provide
written notice.
(Emphases added.) (Citations omitted.)
c. f
0n January 3l, 2006, a bench trial began on Koga’s
Complaint regarding the issues of damages and retainage. 0n May
l5, 2006, the court issued its Findings of Fact, Conclusions of
Law and Order. The court ruled that Koga was entitled to damages
in the amount of $704,963.55 and retainage in the amount of
$l45,250. ln pertinent part, the court made the following
findings:
l5
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KOGA SHARES RESPONSlBlLITY FGR
lNCREASED PROJECT COSTS AND LOST PRODUCTlVITY
29?. Koga failed to impress upon the Stato that the denial
of the night work: ill adversely impacted Koga's work
schedule; €2} that the night work was necessary to mitigate
the impact of relocating the waterline in Phase l; or (3)
that Kooa would be making claim for additional money as a
result of the denial of the nigh work reguest.
298. Koga failed to anticipate all of the indirect costs
that would be associated with Change Order No. 5 and failed
to adequately inform the State that it was experiencing such
costs. As a result, the State was unable to keep strict
account of the actual costs incurred by Koga.
¢
UNPAlD RETAlNAGE
30l. The original total contract amount for the Project was
$5,809,99l.87.
302. The State has not paid Koqa the retention for the
Proiect, which totals $l45,250.00.
§Oé.- hoge should be paid its retainage because Koga
completed the requirements of the fc]ontract.
(Emphases added.)
ln pertinent part, the court made the following
conclusions:
KOGA'S DAMAGES
l46. Pursuant to {Chock’s] expert report, Koga's damages
are comprised of: (a) the increased costs and lost
productivity damages sustained by Koga on the Project; (b)
delay damages or extended overhead damages; (c) bond
charges; and (d) taxes.
JURY VERDlCT METHOD OF DETERMINlNG DAMAGES
l6l.. ln this case, [Chock] opinied [sic] that Koga’s total
damaoesL which included direct and indirect costs, amounted
to $l,409,927.lO.[“l However, the court believes that Koqa
w In an August l, 2001 report prepared by Chock detailing the
alleged damages incurred by Koga, Chock concluded that “Koga experienced an
increase in its direct costs (i.e. labor, material, subcontract eguipment, and
other miscellaneous costs) totaling $l,l73,4ll.50.” Chock also found that
Koga suffered an “unrealized profit” of $ll9,965, an “increase in indirect
costs due to [] delay” in the amount of $92,4l7, and a “loss of opportunity
to mitigate delay costs due to the denial of adding an additional shift” in
the amount of $88,977 (this appears to be an “indirect cost”). Adding
overhead, fees, and tax to his amounts, Chock arrived at a total amount of
$l,534,889.90. lt is not clear why this amount differs from the amount
attributed to Chock in the court's conclusion no. l6l.
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shares responsibilities for these additional costs because
it failed to adequately monitor its costs and because it
failed to adequately manage this project. Consequently, the
court concludes that Koda shares resoonsibilitv for the
additional costs of the oroiect bv 50%. Thus, damages are
awarded to Koga and against the State in the amount of
$704,963.55.
KOGA lS ENTITLED TO THE PAYMENT OF THE UNPAID RETAlNAGE
l62. Since Cctober l, l999, Koda has substantiallV
completed the Proieot, and the State has had full use of the
Project.
l6§.. nowhere in his Declaration does ij Panem testify that
as of the date of the trial, the ounchlist items were not
comQlete.
l66. In contrast, [] Sakaitini testified at trial that Koga
“completed the requirements of the contract and we should be
able to collect the retainage.” »
l6é.. éven the $82,487.89 in retention that the State admits
should be paid to Koga has not been paid.
l7l.' lhe (c]ourt herebv awards Koga its full retention of
§l45¢250.
ORDER
a.' the [c3@urr hereby awards damages totaling $704,963.55
in favor of Koga and against the State[.]
(Emphases added.)
On July l3, 2006, the court granted Koga's motion to
amend the Findings of Fact, Conclusions of Law and Order to
include the retainage amount in the court’s damage amount.
Accordingly, “[t]he damage award . . . in the amount of
$704,963.55 [was] amended to add the retainage amount of
$l45,250.00 for a total damage award of $850,2l3.55[.]”
ll,
A.
ln its SDO, the lCA determined that “[t]he [court] did
not err in granting Koga’s [m]otion for [p}artial [summary
judgment] . . . on the notice issue” because “[t]he State waived
the notice requirement when the State decided Koga’s claim
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on its merits without reference to the notice reguirement.”
§gga, 2009 WL 64l46l, at *2. The lCA relied on two cases cited
by the court in its 0rder, Charles Thomoson & George K. Thomnson,
CoPartners, Trading as Charles & Georde K. Thombson v. United
States, 91 Ct. Cl. 166, l94O WL 4l39 (l940) and W.E. Callahan
Construction Co. v. United States, 91 Ct. Cl. h38, 1940 WL 406O
(l940). The 1CA did not address the issue of whether the State
was prejudiced by Koga's late notice.
B.
ln regard to the retainage issue, the lCA held that
“[conclusions no.] 169 and no. 171 are wrong”“ and that the
court erred in granting Koga’s claim for retainage because such a
claim had not been made in Koga’s comp1aint:
The [court] erred by finding that the State breached the
[c]ontract by failing to pay Koga its retainage and by
including the State's retainage in its damages award because
in the Complaint, Koga failed to assert a claim for
retainage and cite to the fc]ontract provision the State
allegedly breached by failing to bay the retainage. Otani
v. State Farm Fire & Cas. Co., 927 F. Supp. 1330, 1335-36
(D. Haw. 1996); Au v. Au, 63 Haw. 210, 221, 626 P.2d 173,
181 (l981); Laeroc Waikiki Parkside, LLC v. K.S.K. (OahuL
Ltd. P’shiQ, 115 HawaiH_201, 216 n.17, 166 P.3d 96l, 976
n.17 (2007).
§gg§, 2009 WL 641461, at *6. Ultimately, the ICA affirmed the
court’s final judgment “except for that portion of the damages
award, interest, and attorney’s fees that include Koga’s
retainage, which is reversed[,]” and “remanded [the case] to the
§court] to calculate the amount of damages, interest, and
attorney's fees.” 1d. at *7.
“ 1n conclusion no. 169, the court concluded that “[t]he [c]ourt
hereby rejects the State's argument that Koga should not be paid its
retention.” ln conclusion no. 171, the court concluded that “[t]he [c]ourt
hereby awards Koga its full retention of $l45,250.”
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PART II
I.
The State lists the following guestion in its
Application: “Whether the [lCA] gravely erred by holding that
the [court} did not err in granting {Koga's] motion for partial
summary judgment and denying the [State’s] motion for summary
judgment.” In support of this claim, the State presents two
arguments: “l. The State did not waive the contractual
requirement that Koga provide notice of its claim for additional
compensation[ and} 2. Koga’s claim is contractually barred
because Koga's failure to give the State timely notice of the
claim prejudiced the State.” (Formatting alteredr) The State's
Application does not address any of the other holdings reached
by the ICA.
ll,
As to the first argument, the State maintains that
(l) the notice requirement was not waived because “on September
l, 2000, the Engineer denied [Koga's claim] and specifically
stated ‘{n]o mention of a claim’ was made by Koga after the
l8~inch waterline was discovered and Koga submitted its revised
schedule[]” (some brackets in original), (2) in Koga's appeal “to
[the Director], Koga acknowledged that the Engineer relied on
Koga's lack of timely notice of claim in rendering his
//
decision[,] and (3) “in rejecting Koga's Claim, [the Director]
cited, among other reasons, Koga's failure to provide timely
written notice of claim.” The State argues that the ICA gravely
erred because it “ignored the uncontroverted summary judgment
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evidence showing the State denied Koga's claim based, in part; on
late notice{.}”
IlI.
fn regard to the second argument, as noted §upra, the
court found “that any failure on the part of Koga to provide
written notice . . . is excused as the State was aware of the
underlying facts relating to Koga’s [c]laim and was not
prejudiced by Koga's alleged failure to provide written notice.”
The State claims that “even if [it} waived the notice
reguirement,” it did suffer prejudice as a result of “Koga’s
untimely notice[,]” as stated in declarations made by Panem.
The State also maintains that it was prejudiced because
(l) “Koga's untimely notice foreclosed any opportunity for the
State to” consider construction alternatives, or monitor actual
costs, (citing Mingus Constructors, Inc., v. United States, lO
Cl. Ct. l73, 178 (l986)); (2) the fact that it had “knowledge of
the underlying circumstances does not eradicate the existence of
prejudice and its impact on the survival of Koga’s claim[]”
(citing Eggers v. United States, 403 F.2d 225, 233~34 (l968));
(3} “[e]ven if [it] had knowledge of the [waterline] problem,
[it] did not have notice that Koga would submit a claim seeking
additional costs above and beyond those agreed to in Change Order
No. 5[l”; and (4) the ICA’s reliance on Thompson and Callahan was
“erroneous[]” because “neither of the contracts at issue in
[those cases] had a prejudice clause like the one in the contract
between Koga and the [S]tate.”
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lV.
fn its Answering Brief, Koga relied on the cases cited
by the court's Order in arguing that “{a]s clearly demonstrated
by the express language,” the Engineer's Denial “did not cite to
or rely on Koga’s failure to comply with the written notice
requirement as one of the basis {sic] of fits denial] and did not
include a reference to the written notice provision fof the
contract].” Koga also argued in part that “no prejudice exists
where the Government has been ‘intimately aware of the underlying
facts, including the fact that additional costs were being
incurred, from the outset.’ Appeal of Precision Tool and Engin.
QQ;p;, [No. l4l48, l97l ASBCA Lexis l35, *l](l97l).”
Additionally, Koga asserted that the State’s reliance on the
court’s findings that the State was prejudiced was “misplaced, as
this evidence was not before [the court] at the time [the court]
ruled on Koga’s [motion for summary judgment], and therefore
cannot be considered on appeal.”'
V.
in its Reply Brief (Reply), the State claimed that (l)
“the lack of notice was raised by [the Engineer] in [the
Engineer's Denial]” (2) “there is a serious question whether the
older federal cases [cited by Koga in support of its waiver
argument] are still valid[]” (citing Schnip Bldg. Co. v. United
States, 645 F.2d 950, 959 (Ct. Cl. l98l)),N (3) “even under
" Although Schnip decided that the government had not waived the
notice requirement of the contract despite the fact that the contracting
officer had considered the claim on the merits, it does not appear that the
relevant contract provision in Schnip provided the contracting officer with
the authority to extend the time in which a contractor could file a claim.
(continued..J
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those older federal cases . . . , there must also be a showing
that the government was not prejudiced by the contractor's late
submission of claim.” additionally, the State argued that based
on PYCA lndustries, lnc. v. Harrison Countv Waste Water
(}'l
management nia»:., irs ssa 3 i, 356 , the states
knowledge of the facts underlying Koga’s Claim did not relieve
Koga from complying with the notice provisions.
in regard to Koga’s argument on prejudice, the State
asserted that evidence of prejudice was before the court in the
form of Panem's declarations when it ruled on the motions for
summary judgment. According to the State, “Koga did not present
anything . . . to rebut the State's prejudice claim. As such,
the court’s finding of prejudice was reversible error.”
VI.
With respect to the argument that the State waived the
notice requirement, Koga’s Response substantially repeats the
arguments made by Koga in its Answering Brief. As to the State's
claim that it was prejudiced, Koga's Response asserts (l) that
Mingus and Eggers are distinguishable on their facts; (2) that
the State “does not dispute the [court's] finding that the State
was aware of the underlying circumstances for Koga’s claim”
demonstrates that the State was not prejudiced; and (3) based on
Panem’s admissions under oath, “Change Order No. 5 did not settle
"(...continued)
645 F.2d at 954 (noting that the contract “stated in mandatory language: that
the contractor ‘shall promptly, and before such conditions are disturbed,
notify the Contracting Officer in writing' if unexpected subsurface conditions
were encountered . . . and that ‘No claim of the Contractor under this clause
shall be allowed unless the Contractor has given the notice reguired'”).
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Koga’s §cjlaims for indirect impacts” or “bar Koga from
submitting additional claims{.]”
Vll.
This court has stated that “‘{a]s a general rule, the
construction and legal effect to be given a contract is a
question of law.'V Found. Int’l, lnc. v. E.T. loe Const., lnc.,
102 HawaiYi 487, 494~95, 78 P.3d 23, 39-3l (2003) (quoting
Hanagami v. China Airlines, Ltd., 67 Haw. 357, 364, 688 P.2d
ll39, ll44 (l984)). Accordingly, “[a]bsent an ambiguity, {the]
contract terms should be interpreted according to their plain,
ordinary, and accepted sense in common speech.” ld¢ at 495
(brackets in original, citation omitted).
ln this case, the contract requires notice to be given
in four instances.N In its motion for summary judgment, the
State argued that Koga did not provide written notice within the
time set forth in subsections (a) or (b) of section lO5.l8 I 2
(l). Koga has not argued that it provided notice within the
” To reiterate, section lO5.l8 I 2(l) of the contract
requires that notice in writing be given:
(a) Before the commencement of the work involved, if at that
time the Contractor knows of such requirements or the
occurrence of such act or omission; or
(b) Within 30 calendar days after the Contractor knows of
such requirements or the occurrence of such action or
omission if the Contractor did not have such knowledge
before the commencement of the work; or
(c) Within 30 calendar days after receipt of the written
contract change order that was not agreed upon by both
parties; or
(d) Within such further time as may be allowed by the
Engineer in writing.
(Emphasis added.)
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subsections set forth in section l05.lB l 2 (1), or that a
particular subsection applies in this case.
Additionally, section l05.l8 I 2 (2} of the contract
establishes that a contractor waives its claim for extra
compensation in two circumstances: by (l) failing to give
notification as to any of the four subsections in section l05.l8
I 2 (l),” or (2) failing “to afford the Engineer proper
facilities for keeping strict account of actual cost[.]” The
State has not asserted a “failure” on Koga’s part “to afford the
Engineer proper facilities for keeping strict account of actual
cost” as an independent ground for denying Koga’s Claim.”
Rather, the State argues that under section l05.l8 T 3 of the
contract it was prejudiced because Koga's untimely notice
prevented it from “monitor[ing] the actual costs . . . Koga
incurred on a daily basis in order to confirm Koga’s claimed
1121
additional costs.
” The term “such notification” in section lO5.l8 l 2(2) is seemingly
ambiguous, because it does not indicate whether it relates to (l) the failure
to give notice altogether, (2) the failure to include what is required in the
notice, such as “the Contractor’s intention to make a claim and the reasons
why the Contractor believes that additional compensation . . . may be
remedies[,]” or (3) the failure to give timely notice under section l05.l8 l
2(l). Ambiguities in a contract are construed against the drafter. See
Found. Int'l¢ lnc., 102 Hawaifi at 498, 78 P.3d at 34 (quoting Triax Pac.,
lnc. v. West, l30 F.3d l469, l475 (Fed. Cir. l997)).
w Assuming that ambiguity exists as to whether a contractor's
“failure to afford proper facilities” is subject to a “prejudice”
qualification as set forth for “later notification,” again, “[a]mbiguities in
a government contract are normally resolved against the drafter.” Found.
Int’l, Inc., 102 HawaiH at 498, 78 P.3d at 34 (quoting Triax Pac.¢ Inc., 130
F.3d at l475).
“ in a footnote, the State asserted that “[i]n fact, section l05.l8
of the contract required Koga ‘to afford the Engineer every facility for
keeping records of the actual cost of work.’” The State did not elaborate on
this assertion.
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Under section lO5.l8 l 3 of the oontract, “{t]he
Enqineer will review the notice and render a decision.” in this
case, there is no dispute that Koga failed to provide timely
written notice to the State of its Claim under any of the four
subsections of section lO5.l8 I 2 (l).” As to section lO5.l8 l
2 (l)(d) there was no written allowance for “further time” given
by the Enqineer to Koga to file a notice. However, as stated in
section lO5.l8 I 3, “{l}ater notification of such claims shall
not bar the Contractor’s claim unless the State is prejudiced by
the delay in notification.” (Emphasis added.) This provision in
effect qualifies the notice requirements under section lO5.l8 I 2
(l)(a)~(d). Under section lG8.l5 I 3, although Koqa provided
“later notification,” its Claim was not barred unless the State
was prejudiced by the delay in notice. Presumably then, notice
filed within the time limits in section lO5.l8 I 2 (l) would not
be subject to “prejudice” objections by the State as set forth in
section lO5.l8 I 3.
VlIl.
As discussed above, Koqa, the court, and the ICA relied
on Thompson and Callahan for the proposition that “[t]he State
waived the notice requirement when [it] decided Koqa’s [Claim] on
its merits without reference to the notice requirement.”” Koga,
” ~ As noted supra, in its Claim, Koqa stated that it “provided
written notice to” the State in the form of the May 26, 1999 Asato letter.
However, Koga does not claim that this letter was provided within the time
requirements in section lO5.l8 l 2(l) of the contract.
” Accordinq to Koqa, “{i]t is widely recognized in HawaiU.that a
condition precedent to a contract, like formal notice provisions, can be
waived[] by the party for whom the notice was to benefit.” (Citing Scotella
v. Osqood, 4 Haw. App. 20, 659 P.2d 73 (l983); Hinq Bo Gum v. Nakamura, 57
Haw. 39, 43-44, 549 P.2d 47l, 475-76 (l976)). Koga is correct that both
(continued..J
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2009 WL 64l46l, at *2. In Thompson, the plaintiffs brought a
claim for extra compensation after the deadline to bring such a
claim had passed. l94O WL €l39, at *7. This claim was denied by
the contracting officer on its merits. Article 3, the relevant
contract provision in Thom son, stated that “[a]ny claim for
adjustment . . . must be asserted within ten days from the date
‘the change is ordered, unless the contracting officer shall for
proper cause extend such time[.]” Id. at *8 (emphasis added).
The Court of Claims held that the contracting officer had waived
the contract’s notice requirement, stating that the plaintiffs’
claim
would have been barred and out of time had not the
contracting officer entertained it, passed upon it, denied
it, and informed plaintiffs that they could appeal to the
Secretary of the Interior. Under Article 3 of the contract
which provided for the changes, the contracting officer had
the right to extend the time in which to assert a claim for
adjustment of the change order, and therefore, when the
reguest of the plaintiffs was received and acted upon, the
lO-day provision was waived by the contracting officer and
the time extended within which to take an appeal.
ld; at *9 (emphasis added).
Callahan presented the same factual situation as that
in Thompson, and contained identical contractual language. l94O
WL 4060, at *47. Citing Thompson, the Court of Claims held that
“the contracting officer did not reject any of them on that
ground but considered and decided them on the merits, By so
”(...continued)
Scotella and Hing Bo Gum stand for the above proposition. §ee Scotella, 4
Haw. App. at 23, 659 P.2d at 75 (stating that “a condition precedent may be
waived by a party to a contract ‘if it is solely for his benefit’ (quoting
Bing Ho Gum, 57 Haw. at 44, 549 P.2d at 475)). However, in both of those
cases, which involved contracts for the sale of land between private parties,
the party for whom the condition was to benefit specifically argued that it
was waiving the condition. But that situation is factually different from the
one here, where the party purportedly benefitting from the condition is
arguing that it has not been waived.
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doing he waived the lG~day provision. The contracting officer
was expressly authorized to extend the time,” ;gL at *46.
The lCA concluded that this case was “[l]ike Thompson
and Callahan.” ;d; at *5. However, it appears that neither
Koga, the court, nor the lCA examined the specific contract
language of section lO5.l8 to determine whether the waiver
analysis in Thompson and Callahan was germane to this case.
Those cases are not controlling, in light of the express language
of the instant contract.
First, under the “later notification” provision, the
contract provides that late notification of claims is not barred
unless prejudice is visited on the State, apparently without
respect to whether the late claim was considered on the merits or
not. Hence, even if a contractor's claim is late, it will only
be rejected if the State has been prejudiced by the delay in
notification. By contrast, insofar as the contractual language
is recited in the Thompson and Callahan opinions, neither case
contained express provisions in their contracts that would allow
a “later” claim to be brought. Thus, under the subject contract
it is immaterial whether a claim has been considered on its
merits or denied for lack of timeliness, because no late claim
will be barred unless it causes prejudice to the State.
Second, in Thompson and Callahan, the relevant
contractual provision stated that “[a]ny claim for adjustment
under this article must be asserted within ten days from the date
the change is ordered[.]” Thompson, 1940 WL 4l39, at *8;
Callahan, l94O WL 4060, at *26. Unlike those cases, in this
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case, the contract states that the notice in writing must be
given “[w}ithin such further time as may be allowed by the
Engineer in writing.” (Emphasis added.) Therefore, in order for
the Engineer to allow further time, he or she must do so in
writing, which seemingly would incorporate a requirement that the
contractor file its claim by a date certain.
in Thompson and Callahan on the other hand, the
contracts did not specify that the Engineer’s decision to extend
the time needed to be in writing. §ee Thompson, l94O WL 4l39, at
*8 (contract stated that “[a]ny claim for adjustment under this
article must be asserted within ten days from the date the change
is ordered, unless the contracting officer shall for proper cause
extend such time”); Callahan, l94O WL 4060, at *47 (same). Thus,
the fact that Thompson and Callahan treated the contracting
officer's consideration of an untimely claim on the merits as
extending the time in which to file a claim is inapplicable here.
ln this case, any extension of time to bring the Claim
had to be granted in writing by the Engineer, and therefore, a
writing was required to allow further time to file the claim.
Furthermore, unlike the contracts in Thompson and Callahan, the
contract here expressly permits “later notification.”“ The
rationale that consideration of the merits of a claim by the
government waived the contractual time limits in Thompson and
Callahan would be inconsistent with an express provision allowing
for “later notification.”
“ Although Thompson and Callahan did not set forth the complete
language of the contracts at issue, nothing in those cases indicated that a
contractor could provide “later notification.”
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Finally, neither Thompson nor Callahan indicated the
contracts in those cases barred a contractor's claim if the
government was prejudiced by the delay in notification. lt does
not appear, under the language of the contracts in Thompson and
Callahan, that the Court of Claims was required to consider
whether a claim brought after the time requirements in the
contract caused prejudice to the government. ln this case,
however, the “later notification” provision allows untimely
claims “unless the State is prejudiced by the delay in
notification.” Therefore, unlike in Thompson and Callahan, the
court was bound to consider whether prejudice existed.
Koga and the court also relied on Appeal of Robertson-
Henry Co., 61-2 B.C.A. (CCH) I 3l56, Fox Valley Engineering v.
United States, l5l Ct. Cl. 228 (l960), Appeal of General
Excavating Co., 60-2 B.C.A. (CCH) l 277l, and Palumbo v. United
States, ll3 F. Supp. 450 (l953), for the same proposition.
However, these cases are distinguishable, either because, like
Thompson and Callahan, the language of the contracts in those
cases is different from the contract in this case, or because the
relevant contractual language was not discussed. These cases are
not dispositive because the case at bar is controlled by specific
contractual provisions.
IX.
Here, it is undisputed that Koga provided “later
notification” of its claim, whether the Engineer considered the
claim on its merits or not. Because Koga's claim falls within
the “later notification” provision of the contract, it must be
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determined whether the State was prejudiced by the delay.
Prejudice is defined as “{d}amage or detriment to one's legal
rights or claims.” Black's Law Dictionary l2l8 (8th ed. 2004).
Whether or not the government has been prejudiced by a
contractor’s late notice of claim is a question of fact. Eggers,
403 F.2d at 233 (stating that Board of Contract Appeals reached
an “ultimate finding[l of fact” “that the government was
prejudiced by [the] plaintiff’s long and unreasonable delay in
furnishing notice of its claim”); Big Chief Drilling Co. v.
United States, l5 Cl. Ct. 295, 304 (l988) (holding that summary
judgment was inappropriate because “factual uncertainty
remain[ed] regarding whether the government was prejudiced by
[the] plaintiff’s actions” related to notice). See also Advanced
Data Concepts, Inc. v. United States, 2l6 F.3d l054, 1057 (Fed.
Cir. 2000) (concluding that “{p]rejudice is a question of fact”
in bid procurement process).
A.
Koga relies on two Federal Board of Contract Appeals
(BCA) cases, Appeal of Chimera Corp., No. l8690, l976 ASBCA Lexis
223 (l977), and Precision Tool, in support of its argument that
the State was not prejudiced. ln Chimera, the BCA heard
testimony and made findings in regard to the plaintiff’s claim
that it was entitled to additional compensation under a contract
to build engines. l976 ASBCA Lexis 223, at *2. The government
issued several contract modifications, and over two years after
the last modification, and after the completion of the contract,
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the plaintiff filed a claim for additional compensation, which
was denied by the contracting officer.” ld; at *32.
The BCA stated that “[a]ppeals boards have generally
not been inclined to dismiss or deny appeals based solely on the
absence of formal notice under the Changes clause where prejudice
to the {g]overnment’s interest is not shown{.]” ldA The
government contended that its “interest ha[d] been prejudiced”
due to the lack of available witnesses and records related to the
case, ld; at 33. The BCA held that the government was not
prejudiced by an inability to defend itself, stating that
{w]hile it may be argued that delay in the assertion of a
claim inevitably causes prejudice in some degree, the [BCAl
finds that the degree of prejudice presently demonstrated in
the record of this appeal is not sufficient to warrant
barring the claim for untimeliness. The [g]overnment's most
important witnesses were available at the time the claim was
asserted, and the premature destruction of its own records
is not [the plaintiff’s] responsibility.[“] Nonetheless,
the foregoing finding does not preclude the [g]overnment
from raising the dilatory notice of claim as a defense on
the merits of the claim. In this regard, a contractor's
failure to file claims timely increases the burden of
persuasion which rests upon the claimant, to offset the
prejudice caused the {g]overnment.
ldL at *33-34 (emphases added, citations omitted).
In Precision Tool, the second case cited by Koga,
plaintiff entered into a contract with the government to produce
mechanical parts. Several months after the government issued a
unilateral modification to the specifications for the parts the
plaintiff filed a claim for additional compensation, which was
denied by the contracting officer for untimeliness. l97l ASBCA
“ Chimera did not state the basis for the contracting officer's
decision.
” Some of the government’s witnesses had testified that they could
not accurately calculate the plaintiff’s claim because government records had
been destroyed.
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Lexis l35, at *l. The plaintiff appealed to the BCA, which heard
testimony and made findings. ;dy at *2. The BCA found that due
to the modification, the plaintiff had to alter its production
sequence, and “{glovernment representatives . . . were aware of
the reasons for reversing the sequence . . . and acquiesced in
the revised procedure.” ld; at *4.
Although the plaintiff did not file a timely written
claim, “it kept the [g}overnment’s project manager . . . fully
advised throughout the period of the contract of the problems the
modification was causing, including the fact that it was
increasing [the plaintiff's] costs.” Ld; at *5. The BCA found
that the plaintiff, could not predict the effects that the
modification would have on its equipment until after getting into
production. ld; at *6. The government argued it was prejudiced
because it lost the “opportunity to withdraw and cancel [the]
modification[,] . . . [thereby] giving the [g]overnment an
opportunity to consider alternative actions.”” The BCA held
that it could not “find real prejudice to the [g]overnment”
because “the [g]overnment has been intimately aware of the
underlying facts, including the fact that additional costs were
being incurred, from the outset.” ld4 at *9-10 (citations
omitted).
” lt is not clear whether the contracting officer “spelled out” this
theory in his written decision denying the claim or during his testimony ‘
before the BAC. The BAC noted that at the hearing, the contracting officer
“conceded merit in the claim and indicated it was, in fact, the advice of his
legal advisor . . . to stand on [the plaintiff's] simple failure to file a
claim within the 30-day period, rather than bona fide prejudice, which
prompted his refusal to consider the claim on its merits.” ld. at *9.
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B.
On the other hand, the State relies on Mingus for the
proposition that it was prejudiced because “Koga’s untimely
notice foreclosed any opportunity for the State to {consider
construction alternatives or monitor actual costs}.” ln Mingus,
the plaintiff and the government entered into a contract to build
a road. 10 Cl. Ct. at l74. During construction, the plaintiff
sent letters to the government stating that it would be filing a
claim for additional costs due to the “unreasonable” actions of
the contracting officer and “‘other items of work which were
either misrepresented by the contract documents or constructed
outside the scope of the original design.’” ;d; at 174-75. Over
one year after final payment under the contract had been made,
the plaintiff filed its claim, but the contracting officer denied
it on the basis that it had not been brought prior to final
payment. ld; at 175-76.
Mingus granted summary judgment in favor of the
government, concluding that “[w]hile . . . the contracting
officer had actual knowledge that [the plaintiff] . . . had
contemplated asserting a right to additional compensation, the
‘knowledge’ did not extend to specific claims and [did not]
override considerations supporting the final payment rule
grounded in prejudice to the government from untimely assertion
of contractor claims.” ;g4 at l78 (emphasis added). Mingus
looked to affidavits provided by the government showing that it
had suffered prejudice as a result of the plaintiff’s untimely
notice:
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since notice transmitted by way of {the} plaintiff’s claim
was provided to the government after the road work had been
completed, actual existing conditions cannot be verifiedL
the government was deprived of the opportunity to consider
alternate solutions, if neoessarv; and to maintain records
pertaining to the cost of any additional work. By the time
notice was received, the physical aspects of the area in
question were completely altered. Under these conditions,
the late notice is highly prejudicial to the government’s
proper analysis and presentation of its case,
. {A]ffidavits submitted by the government show
that if timely notice had been provided by [the] plaintiff,
the government would have discussed the matter with {the]
plaintiff and would have performed examinations and job site
investigations. ln addition, the government asserts that
investigative results would have been documented. The
validity of the {plaintiff's] claim cannot now be determined
with the degree of accuracy or certainty which prompt notice
would engender since original site conditions have been
altered by construction.
ld; (emphases added). The Mingus court held that “[v]iewing the
record as a whole, it is concluded that the relief [the]
plaintiff seeks under the contract fails for lack of timely
notice, in libht of prejudice shown by the government.” ld.
(emphasis added).
Additionally, the State relies on Eggers to support its
position that “knowledge of the underlying circumstances does not
eradicate the existence of prejudice[.]” ln Eggers, the
government, after entering into a construction contract to design
a hospital with the plaintiff that contained a fixed deadline,
instructed the plaintiff to stop work on the project. 403 F.2d
at 227. Approximately two months later the government instructed
the plaintiff to resume work, and the plaintiff requested an
extension of time in which to complete the work. ;d; This
request was denied by the government, and the plaintiff completed
the work within the original deadline. ldL at 227-28. Five
years later the plaintiff brought a claim for increased
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compensation as a result of the government’s refusal to extend
the deadline, but the claim was denied. Ld; at 228.
The plaintiff appealed to the BCA, which heard
testimony and considered findings made by a “trial
[clommissioner” prior to the BCA's consideration of the case,
The contracting officer testified that late notice made it
difficult to verify the plaintiff’s claims and that had he known
plaintiff was going to file a claim, he would have taken
alternative action to reduce costs. ;d; at 230-3l. The BCA
determined that “the [g]overnment has been deprived of its right
and duty to evaluate its position, in the light of a monetary
claim, at a time and under conditions when an adjustment
could have been made.” ld; The Court of Claims also held that
“[w]ith respect to the [BCA's] findings of prejudice to defendant
and lack of knowledge of the contracting officer, such
determinations are supported by the inherently reasonable
testimony of the contracting officer.” §d¢”
C.
Koga argues that Mingus and Eggers are distinguishable
from this case because in those cases the contracting officer
(l) did not consider the claim on the merits, and (2) either “did
not have any particular knowledge of the facts giving rise to the
plaintiff’s claims” or did not know that the plaintiff was
” The Court of Claims found that the contracting officer {l) “did
not know, and in fact had sufficient reason to believe and did believe to the
contrary, that acceleration of work and increased costs would result from his
denial of the requested extension of time,” and (2) that the contracting
officer “could have deferred the target date for awarding of the construction
contract, and taken action necessary to avoid the claimed costs for
acceleration of work.” Eggers, 403 F.2d at 234.
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incurring increased costs. As to Koga's first point, under the
language of the contract in this case, whether the Engineer
considered Koga’s Claim on the merits and therefore waived time
requirements is irrelevant. The contract here expressly allowed
for “later notification.”
As to Koga's second point, both Mingus and Eggers
looked at the particular facts of each case to determine whether
the government was prejudiced by late notice. The issue in
Mingus was whether the government knew that the plaintiff would
be asserting specific claims, and the Court of Claims looked to
letters sent by the plaintiff that failed to allege particular
facts regarding its claim in concluding that the government was
prejudiced. lO Cl. Ct. at l78. Unlike this case, in Mingus,
there was no indication that the government was at the
construction site to witness any alleged problems the plaintiff
was experiencing. ld; at l7S.
In Eggers the issue was whether the government knew
that its actions would result in the plaintiff incurring
increased costs, and the Court of Claims looked to, inter alia,
the contracting officer's subjective belief as to whether he
believed that the plaintiff would incur increased costs. Eggers,
403 F.2d at 234. After the government accelerated the time in
which the plaintiff could complete the contract and denied the
plaintiff’s claim for an extension of time, no further
communication on the issue occurred. ld; at 228. ln this case,
on the other hand, once Koga became aware of the inaccuracy in
36
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the plans, it notified the State, and changes to the contract
were made as a result.
with the exception of Mingus, all the cases discussed
above relied on witness testimony in determining whether the
government suffered prejudice as a result of an untimely claim
for increased compensation, ln Mingus, on the other hand,
summary judgment was appropriate because the record showed that
the government’s knowledge of the plaintiff’s claim was so
cursory that the “contracting officer [didynot] know[], or [was
not] properly chargeable with knowledge, that at the time of
final payment the [plaintiff was] asserting a right to additional
compensation.”” 10 Cl. Ct. at l77 (citation omitted).
X.
lt is established that “in reviewing summary judgment
decisions[,] an appellate court steps into the shoes of the trial
court and applies the same legal standard as the trial court
applied.” Beamer v. Nishiki, 66 Haw. 572, 577, 670 P.2d l264,
1270 (l983) (citing Fernandes v. Tenbruggencate, 65 Haw. 226,
228, 649 P.2d ll44, ll47 (l982)). ln that connection,
summary judgment is appropriate if the pleadings,
depositions, answers to interrogatories, and admissions on
file, together, with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law. A
fact is material if proof of that fact would have the effect
of establishing or refuting one of the essential elements of
a cause of action or defense asserted by the parties. The
evidence must be viewed in the light most favorable to the
non-moving party. In other words, we must view all of the
” As discussed above, in notifying the contracting officer that it
would be filing a claim, the plaintiff “did not specify any particular
instances of misconduct or connect any specific substantive claims to the
project superintendent's conduct[.]” Mingus, l0 Cl. Ct. at l75.
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evidence and the inferences drawn therefrom, in the light
most favorable to the party opposing the motion.
Omerod v. Heirs of Kaheananui, ll6 Hawai‘i 239, 254~55, l72 P.3d
983, 998-99 (2007) (citations omitted) (emphases added).y whether
or not the State suffered prejudice is a material fact, because
“establishing or refuting” it would determine whether or not
Koga’s claim was barred by the “later notification” provision of
the contract. _§e Omerod, ll6 Hawafi at 255, l72 P.3d at 998
(stating that “[a] fact is material if proof of that fact would
have the effect of establishing or refuting one of the essential
elements of a cause of action or defense asserted by the
parties”). Under the “later notification” provision, proof of
prejudice is an “essential element of a . . . defense asserted by
[the State].” ld;
A.
ln that connection, the State provided a declaration by
Panem (Panem’s first declaration), in which he stated that
“because of the lack of notice, the State was not aware that it
should monitor the costs claimed by Koga as the work progressed.”
Additionally, in its memorandum in opposition to Koga’s motion
for partial summary judgment (memorandum in opposition), the
State proffered a second declaration, wherein Panem stated that
due to the lack of notice, the State had not explored
construction alternatives or monitored Koga’s costs
fb]ecause the State did not receive timely notice that Koga
would be making a claim based upon the discovery of the
waterline, the directed suspension of work, and the denial
of double shift work, the State did not explore construction
alternatives such as suspending the entire project until the
waterline was relocated or terminating the project at one of
several points such as shortly after the waterline was
discovered in September of l997, when Koga submitted the
revised construction work schedule in November of l997, or
38
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when [C]hange [0}rder [N}o. 5 was negotiated, or monitor the
costs claimed by Koqa as the work prodressed[.”}
(Emphases added.)
On the other hand, in Koga’s opposition to the State’s
motion for summary judgment, Koga argued that Change Order No. 5
did not “operate[] as a full and final release of Koga’s claims
for additional compensation[.]” According to Koga, “the State
was clearly aware of the changes resulting from the unanticipated
discovery of the conflict involving the [waterline,]” because
“Koga provided immediate notice to the State regarding the
problems stemming from the location of [the waterline.” Koga
cited to the Sakaitini affidavit, which stated that (l) “[a]side
from a few exceptions, state officials and/or its construction
managers were present at the Project site at all times during
Koga’s work on the Project[,]” (2) “[f]ollowing a meeting with
the State, it was jointly decided that Koga would abandon its
Approved Schedule and start with work on . . . Phase II[,]” (3)
Koga eventually began work on Phase I, but “contrary to the
parties’ discussions, the State issued a stop order on [Phase 1
work,] . . . [and] Koga was then forced to re-shuffle its work on
the water system in Phase lII[,]” and (4) “Koga and the State []
had daily discussions in regards to Koga's progress and work
schedule on the Project.” Koga argued that the State was not
orejudiced because it was “obviousl/ aware of the underl inc
L .J `j
” Panem's declaration regarding prejudice in the State's memorandum
in opposition was nearly identical to his declaration in the State's motion
for summary judgment, except that the latter did not reference “the directed
suspensions of work[] and the denial of double shift work[.]”
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facts, including the fact that additional costs were being
incurred{.]”
B.
In sum, at the summary judgment stage, the State
presented evidence to the court that it was prejudiced by lack of
notice prior to Koga’s Claim, while Koga presented evidence that
the State was aware of the facts giving rise to Koga’s Claim, and
thus that the State was not prejudiced. Therefore, ordering
summary judgment on this issue of material fact was wrong. §ee
Ameron, 1nc. v. Tradewinds E1ec. Service & Contracting lnc., 80
Hawafi 218, 224, 908 P.2d 1204, 1210 (1995) (vacating grant of
summary judgment on the basis that a genuine issue of material
fact remained). Because Koga was not entitled to judgment as a
matter of law in regard to whether the State was prejudiced, the
court’s grant of Koga's motion for partial summary judgment must
be vacated, and the case remanded for trial on the prejudice
issue.“
XI.
lt should also be noted that despite the fact that the
court granted Koga's motion for summary judgment in part on the
basis that the State did not suffer prejudice, at the subsequent
trial, the court found in finding no. 298 that Koga “failed to
adequately inform the State that it was experiencing [indirect
“ In Koga’s Response to the State’s Application, Koga states that it
“strongly prefers to proceed with the remand to the [court] as set forth in
the decision of the [ICA], and should [this court] deny the State's
{Application], Koga wishes to withdraw its [Application] and to proceed to
close this matter consistent with the [ICA’s SDO].” Inasmuch as the ICA
incorrectly affirmed the grant of partial summary judgment to Koga, the case
cannot be remanded as determined by the ICA.
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costs associated with Change Order No. 5}. As a result, the
State was unable to keep strict account of the actual costs
incurred by Koga.” Additionally, the court found in finding no.
297 that “Koga failed to impress upon that State . . . that {it}
would be making a claim for additional money as a result of the
denial of the night work request.””
These findings appear to contradict the court’s
determination at the summary judgment stage that the State “was
not prejudiced.” The parties do not cite to any Hawafi case law
addressing the issue of whether, in its review of a summary
judgment ruling, an appellate court can consider a trial court’s
findings made at trial subsequent to the ruling on the motion for
summary judgment. However, it has been stated that at the
summary judgment stage, the appellate court “can consider only
those papers that were before the trial court. The parties
cannot add exhibits, depositions, or affidavits to support their
position.” 10A Charles Alan Wright, et. al, Federal Practice &
Procedure § 2716 at 282 (3d ed. l998).
” ln its Opening Brief, the State relied on findings nos. 297 and
298 in support of its argument that it was prejudiced. The State did not
reference the court’s findings in its Reply Brief or Application. In its
Answering Brief, Koga argued that the State's reliance on the court’s findings
was “misplaced, as this evidence was not before the {court] t the time the
[court] ruled on Koga’s [motion for summary judgment], and therefore cannot be
considered on appeal.”
Additionally, Koga claimed that “the State's argument is
misleading as [findings nos. 297-298] were related to the issue of damages and
contrary to the [court's order] on Koga’s motion in limine on notice.” In
that order, issued on March 15, 2006, the court ruled that Koga's Motion in
Limine Precluding the State From lntroducing Evidence and/or Testimony
Regarding the Defense of Lack of Written Notice Relating to Koga's Claims was
“granted to the extent that the [Summary Judgment Order] remains in effect.”
The court also ruled that “[t]he State may introduce evidence on the lack of
written notice on the issue of accord and satisfaction regarding Change Order
No. 5 and the reasonableness of the State's actions with respect to K0ga's
double shift claim.”
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lt appears that a majority of jurisdictions has
interpreted this statement to mean that “review {of a ruling on a
motion for summary judgmentj is confined to an examination of the
materials before the court at the time the rulings were made.
Neither the evidence offered subsequently at the trial nor the
verdict is relevant.” Voutour v. Vitale, 761 F.2d 812, 817 (lst
Cir. 19B5). See also Lippi v. City Bank, 955 F.2d 599, 604 (9th
Cir. 1992) (stating that in reviewing motion for summary
judgment, appellate court “do{es] not rely on evidence introduced
at trial or on the jury's verdict”); Cullen Enters. v. Mass.
Propertv lns. Underwriting Ass’n, 507 N.E.2d 7l7, 719 n.9 (Mass.
1987) (noting that “[t1he {defendant] in its brief argues that
the trial iudge’s findings of fact support its assertion that
summary iudgment was improperly allowed” but concluding that
“[r]eliance on facts not before the motion judge is improper” and
'that review of a motion for summary judgment is “confined to an
examination of the materials before the court at the time the
rulings were made” (emphases added)).”
Following the foregoing approach, this court cannot
consider trial findings no. 298 and no. 297 made by the court in
comparison with the Summary Judgment Order. Thus “we are
” The Third Circuit has reached a seemingly opposite conclusion.
See Ford Motor Co. v. Summit Motor Prods., lnc., 930 F.2d 277, 285, (3rd Cir.
l991) (stating that in its review of motion for summary judgment, it would
“consider any additional evidence in the record before us, even though that
evidence may have been submitted to the district court after it had ruled on
{the plaintiff's] motion, in order to avoid any prejudice to [the defendant]
and as part of our plenary review”). However, this conclusion was reached in
the context of the district court’s conversion of a Federal Rules of Civi1
Procedure Rule l2(b)(6) motion into a motion for summary judgment, a factual
scenario that is not present in this case.
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confined to an examination of the materials before the court at
the time the {summary judgment} rulings were made.” Cullen
Enters., 507 N.E.2d at 719 n.9.
RART III
l.
A.
ln regard to the retainage dispute, the court made the
following findings:
303. On October 4, l999, Koga gave the State notice that
Koga was substantially complete with the Proiect as of
Friday, October l, l999.
304. The State, [Wesley] Segawa[“] and Koga conducted a
final inspection in November of 1999 [(first inpsection)].
305. In l999, {the] State proposed giving Koga a rebate(”]
due to punchlist{M work] on the sidewalks, curbs and
gutter.
(Emphases added.) According to Koga, it “did not accept the
rebate, choosing instead to perform corrective work on the
punchlist items.”
In the meantime, on December 26, 200l, Koga filed its
Complaint as noted previously. ln its Complaint, Koga stated
that “[the court] has jurisdiction over the State in this action
pursuant to Hawai‘i Revised Statutes [HRS] § 661-l(1) and [HRS] §
l03D-7ll.” (Emphasis added.) According to Koga, the Complaint
did not raise “the issue of the State’s failure to pay Koga’s
retention” because “[a]t the time Koga filed its Complaint . . .,
“ Segawa was hired by the State to help monitor the Project.
“ Although not defined by the parties, a “rebate” in this context
appears to be a reduction in the amount paid by the State to Koga as a result
of unfinished work.
” The “punchlist” “is [a] list of non-conforming work[.]” The term
“non-conforming work” was not defined by the parties, but was apparently work
on the Project that the State deemed unfinished or necessary of correction.
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the issue . . . had not yet arisen as Koga's corrective work on
the Project was still ongoing.”
At trial, the court made the following findings
regarding Koga’s work on the punchlist:
306. Koga thereafter performed work on the punchlist and
advised Segawa of this work in a memo dated December 2,
2004.
307. A second inspection was conducted by fGene Quiamas
fQuiamas), a Highway Construction Inspector for the State,]
on December 9¢ 2004.
ln a December 9, 2004 facsimile from Quiamas to Panem regarding
the second inspection (Quiamas’s facsimile), Quiamas provided a
list of work that Koga was required to complete. Quiamas related
that a majority of the items on the list was complete, but
indicated that there were also items on the list not completed.
Quiamas stated that “Koga has previously indicated that they
{sic] will work directly with [the] DOT[] to resolve [the
uncompleted items].”
In regard to the second inspection, the court found
that:
308. Panem concluded that the only remaining punchlist
items related to the following: (a) a construction joint at
curb and gutter not uniform; (b) concrete droppings,
blotches, fins, burrs, tripping hazards; (c) curb and
gutters: joints do not match, at GDls, curbs do not have
batter; concrete spalling on curb and gutter; uneven
elevations; (d) waves on curbing.
309. Panem calculated a rebate for the punchlist items of
§62,762.1l.
3l0. Quiamas stated that there is a certain amount of
deviation that would be acceptable but that the contract
documents only provide the State with the discretion.
Quiamas knows of other projects where the [State Department
of Transportation] allowed some deviation.
3ll. ln the State’s Progress Payment No. 36 dated December
l4, 2004, Mr. Panem admits that the work completed is
“100%.”
3l2. Koga should be paid its retainage because Koga
completed the requirements of the [c]ontract.
(Emphases added.) Progress Payment No. 36 is a form. According
44
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to the completed blanks on the form, the “Work Completed” was
“100.0%,” the “Payment now Due” was “$B2,487.89,” and the
“Retainage” was “$62,762.1l.” in other words, it appears that
following the first inspection, the State had calculated Koga’s
retainage to be $l45,250. ln the second inspection, the State
determined that Koga had completed some of the work identified as
incomplete in the first inspection, and it appears the State
recalculated Koga’s retainage as $62,762.ll to reflect incomplete
work. According to Quiamas’s facsimile, Koga had not completed
five out of fifty-eight items on the punchlist. Progress Payment
No. 36 was signed by Panem on December l4, 2004, but was not
signed by Koga. This was after Koga had filed its Complaint on
December 26, 200l.
l.
On January l3, 2006, the State filed a “motion in
limine to exclude [the] introduction of evidence on[, inter
alia,] . . . [w]hether the retainage held by the State is
appropriate.” According to the State, the issue of retainage was
“not raised in the Complaint, Accordingly, evidence on these
issues should be precluded at trial.” Citing a contract
provision allowing the State to “retain 5% of the value of the
work done until final payment on the Contract is made[,]” the
State argued that Koga “ha[d] not alleged in its Complaint that
it has satisfactorily completed all the work required . . . or
that final payment on the Contract has been made.” The State
then asserted that Koga would “add retainage . . . to the
Complaint.”
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§Koga] has asked several deponents about the retainage and
the status of the §punchlist§ and whether the specifications
may be waived. The State anticipates that {Kooal will add
the retainage and ounchlist issue to the Complaint. These
issues were not raised in the Complaint and evidence on
these issues should be excluded.
(Emphasis added.)
2.
On January 20, 2006, Koga filed a memorandum in
opposition to the State's motion in limine (Koga’s opposition to
the motion in limine) arguing that “evidence of the State’s
withholding of retainage goes directly towards Koga’s claim for
breach of contract.”” (Emphasis added.) According to Koga, (l)
“in order to obtain a final and just resolution of this case, the
issue of retainage must be addressed by the Court . . . [,]”
(2) “[t]he State was aware of this fact as Koga and the State
were previously negotiating a settlement and release of the
retainage[, h]owever, there were differing opinions between the
parties as to what would be released and what work remained under
the [c]ontract[,]” and (3) “as there were extensive negotiations
“ According to Koga, “[t]he State breached the following contractual
provision (payment provision)”:
For and in consideration of the covenants, undertakings and
agreements of the CONTRACTOR herein set forth and upon full
and faithful performance thereof by the CONTRACTOR, the
STATE hereby agrees to pay the CONTRACTOR the sum of FIVE
MILLION ElGHT HUNDRED NlNETY ONE AND 87/100 DOLLARS
($5,809,99l.37) in lawful money, but not more than such part
of the same as is actually earned according to the STATE’s
determination of the actual quantities of work performed and
materials furnished by the CONTRACTOR at the unit or lump
sum prices set forth in the attached proposal schedule.
Such pavment, including extras, shall be made, subject to
such additions or deductions hereto or hereafter made in the
manner and at the time prescribed in the specifications and
this contract.
(Emphases added.)
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regarding retainage, the State simply cannot argue that it
didn’t know retainage would be an issue in this case.”
3.
On January 25, 2006, the court orally denied the
State’s motion in limine to exclude the issue of retainage.B On
May l5, 2006, the court issued its Findings of Fact, Conclusions
of Law, and 0rder. ln the following relevant conclusions the
court decided Koga was entitled to the retainage because it had
completed the contract:
39. Koga performed all of the work that it was hired to
perform and was contractually obligated to perform in
regardf] to the project.
40. The State admitted that, except for a few outstanding
punchlist items, Koga performed all of [itsl duties under
the contract and Koga has, therefore, proved by a
preponderance of the evidence that it fully performed all of
[its] contractual obligations in regard[] to the Project.
l69. The [cIourt hereby rejects the State's argument that
Koga should not be paid its retention.
l70. The State's refusal to pay Koga the unpaid retainage
constitutes a material breach of its contract with Koga in
regard[] to the Project.
l7l. The [c]ourt hereby awards Koga its full retention of
§l45¢250.
(Emphases added.)
B.
The ICA held that “[conclusions no.] 169 and no. l7l
are wrong” because such a claim had not been made in Koga’s
complaint:
The [court] erred by finding that the State breached the
[c]ontract by failing to pay Koga its retainage and by
including the State’s retainage in its damages award because
in the Complaint, Koga failed to assert a claim for
retainage and cite to the {clontract provision the State
allegedly breached by failing to pay the retainage. Otani
” The court stated “I’m going to allow the evidence in so the motion
is denied except for weather.” In its motion in limine, the State had also
sought to exclude “[e]vidence regarding the State’s suspension of work due to
unsuitable weather[.]”
47
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v. St€te Farm fire & Cas. Co., E27 F. Supp. l33G, l335~3@
{D. Haw.l996); Au v. Au, 63 Haw. 2lG, 22l, 62" P.2d l73, 181
(l93l); Laeroc WaikiKi Parkside, LLC v. K.S.K. {Oahu} Ltd.
P'ship, ll5 HawaiU_20l, 216 n. ll, 166 § 3d 96l, 976 n 37
(ZUD7}.
Koga, 2GO9 WL 64l46l, at *6 {emphasis added).
ll.
ln its Application, Koga presents the following
guestions:
l. ls it proper for an appellate court to deny a plaintiff
recovery on a breach of contract claim based on the
plaintiff’s failure to cite to the contractual provision
allegedly breached in his or her complaint, when it is
undisputed that: {i) the defendant had notice of the claim;
(ii) the plaintiff is able to cite to the contractual
provision breached by the defendant; and (iii) the defendant
breached the contractual provision?
2. Does a trial court's: (i) authorization of the
introduction of evidence on an issue which a defendant
asserts was not raised in the Complaint, and (ii) subsequent
entry of findings on the same issue, constitute a
constructive amendment of a plaintiff’s pleadings as
permitted by {Hawafi Rules of Civil Procedure (HRCP)1 Rule
15 gm n ? £"1
3 Can a conclusion of law that a party is contractually
entitled to payment be overturned when the conclusion is
supported by a trial court’s findings of fact and the
application of the correct rule of law?
(Emphases added.) Koga maintains that “[t]he retainage [it]
seeks is not an additional award of damages, but simply the
” HRPC Rule l5, entitled “Amended and Supplemental Pleadings,”
states in relevant part in subsection (b) that
[w1hen issues not raised by the pleadings are tried by
express or implied consent of the parties, they shall be
treated in all respects as if they had been raised in the
pleadings. Such amendment of the pleadings as may be
necessary to cause them to conform to the evidence and to
raise these issues may be made upon motion of any party at
any time, even after judgment; but failure so to amend does
not affect the result of the trial of these issues. §§
evidence is objected to at the trial on the ground that it
is not within the issues made by pleadings, the court may
allow the pleadings to be amended and shall do so freely
when the presentation of the merits of the action will be
subserved thereby and the objecting party fails to satisfy
the court that the admission of such evidence would
prejudice the party in maintaining the party's action or
defense upon the merits, The court may grant a continuance
to enable the objecting party to meet such evidence.
(Emphases added.)
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remainder of the payment due . . . [because} ‘Koga completed the
requirements of the contract.’”
lll.
However, in its Response, the State argues for the
first time” that Koga “never submitted” its retainage claim as
required by HRS § lO3D-703 (Supp. l999), and thus, this court
lacks jurisdiction. HRS § lO3D~7G3, entitled “[a]uthority to
resolve contract and breach of contract controversies[,]”
provides in relevant part that
(a) This section applies to controversies between a
government body and a contractor which arise under . . . a
contract between them, including, without limitation,
controversies based upon breach of contract . . . or other
cause for contract modification or rescission.
(b) The chief procurement officer, the head of the
purchasing agency, or a designee of either office is
authorized, prior to commencement of an action in a court
concerning the controversy, to settle and resolve a
controversy described by subsection (a). This authority
shall be exercised in accordance with rules adopted by the
policy office.
(c) lf such a controversy is not resolved by mutual
agreement, the chief procurement officer[ or1 the head of a
purchasing agency . . . shall promptly issue a decision in
writing. The decision shall: _
(l) State the reasons for the action taken; and
(2) Inform the contractor of its right to initiate a
judicial action as provided in this part,
(e) The decision under subsection (c) shall be final
unless the contractor commences a judicial action in
accordance with section l03D-7ll.
(f) lf the chief procurement officer, the head of the
purchasing agency1 or the designee of either office does not
issue the written decision required under subsection (c)
within ninety days after written reguests for a final
decision, or within such longer period as may be agreed upon
by the parties, then the contractor may proceed as if an
adverse decision had been received.
(Emphases added.) HRS § lO3D-7ll (Supp. l999) allows a party
“ fn its Opening Brief, the State did state that “Koga never claimed
the retainage as part of its damages during the Administrative Proceedings,
when it filed its complaint, when it responded to the State's discovery
reguests, or in its expert report.” (Emphasis added.) However, the State did
not argue that this divested the court of jurisdiction to decide the retainage
issue.
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aggrieved by an adverse decision under section lO3D~703, to
commence judicial action. HRS § lG3D~7ll states in relevant part
that “{a] person aggrieved by a decision issued pursuant to
section lU3De703 . . . may initiate an action under section 66l~l
To the extent the remedies provided in this part
differ from the remedies available against the State under
chapter §6l, the remedies shall be as provided in this part.”
HRS § 66l~l (l993) establishes jurisdiction in the circuit courts
over contract disputes against the State and provides that “[t]he
several circuit courts of the State . . . shall . . . have
original jurisdiction to hear and determine . . . [a]ll claims
against the State founded . . . upon any contract . . . with the
State[.]” According to the State, Koga did not exhaust its
administrative remedies under HRS § lO3D~703, and thus “{this
c]ourt does not have jurisdiction over the retainage claim[.]”
IV.
Although the State failed to raise its jurisdiction
argument before the court or in its appeal to the lCA, “[i]t is
well-established . . . that lack of subject matter jurisdiction
can never be waived by any party at any time,” Chun v.
EmploVees’ Ret. SVs., 73 Haw. 9, l3, 828 P.2d 260, 263 (l992)
(citing In re Application of Rice, 68 Haw. 334, 713 P.2d 426
(l986)). Accordingly, “[w]hen reviewing a case where the circuit
court lacked subject matter jurisdiction, the appellate court
retains jurisdiction, not on the merits, but for the purpose of
correcting the error in jurisdiction.” Amantiad v. Odum, 90
Hawafi l52, l59, 977 P.2d l60, l67 (l999).
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A.
in this case, the parties do not dispute that following
the first inspection, the State properly notified Koga of “non»
conforming work.” Pursuant to Section l05.l7, Koga attempted to
“correct and complete the non-conforming work.” On December 2,
2004, Koga sent a letter to Quiamas (December 2, 2004 letter),
which stated as follows: “Flease be informed that items 30, 4l,
50, 53, 54, 56, & 57 on the final punchlist has [sic] been
completed as of this date. Please acknowledge completion of
these items and contact me should you have any guestions.”
As noted above, on December 9, 2004, the State
conducted the second inspection. Quiamas confirmed that Koga had
completed the work items listed by Koga in its December 2, 2004
letter, but he also determined that other work items on the
puchlist remained incomplete.“ lndicating these items on the
punchlist using a checkmark, Quiamas sent a facsimile of the
punchlist with his notations to Panem. lt is not clear whether
Koga received a copy of the punchlist indicating the incomplete
work identified by Quiamas.” However, Panem stated in his
deposition that Progress Payment No. 36, which released a portion
.of the retainage held by the State, “probably was transmitted to
Koga’s office,” and that “all {the State was] waiting for [was]
“ ln particular, Quiamas indicated that items l5, l6, 52, 55, and 58
were not complete.
“ At the bottom of the cover sheet of Quiamas's facsimile, the
following is written: “c: Kyle Sakaitani, Koga 325~8228.” Furthermore, the
cover sheet stated that “[b]y way of this facsimile, I’ll inform Koga to
recheck the area and make it presentable.” This appears to indicate that Kyle
Sakaitini, the head of Koga's Big lsland operations, was copied on Quiamas's
facsimile, ’
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for Koga to return it with [its} signature." Koga does not claim
that it did not receive Progress Payment No. 36, or that it was
not properly notified by the State that there were work items on
the punchlist that the tate continued to deem non-conforming.
B.
ln this case, HRS § l03D-703 sets forth a procedure for
\\'
resolving contract controversies under which the State is
authorized, prior to commencement of an action in a court
concerning the controversy, to settle and resolve . . . in
accordance with rules adopted by the policy office.” HRS § l03D-
703(b). At the point that the State notified Koga of non-
conforming work discovered during the second inspection, Koga was
required under section l05.l7 of the contract to “correct and
complete the non-conforming work.” If Koga disagreed with the
State's position that non-conforming work remained, and therefore
Koga felt that it was entitled to the retainage withheld by the
State in Progress Payment No. 36, such a disagreement would
constitute a “controversy” within the meaning of HRS § l03D-703
that the Engineer was “authorized, prior to commencement of an
action in a court concerning the controversy, to settle and
resolve[.]” HRS § 1030-703(b).
Thus Koga’s claim that the State has “breached the
contract” by failing to pay retainage is a “controvers[y]” within
the meaning of HRS § l03D~703, and accordingly, the procedure set
forth in that statute applies to Koga’s retainage claim. HRS
§ 1030-703(a). Neither party has identified relevant “rules
adopted by the policy office” that would apply in this case, but,
52
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as the State points out, Section l05.17{B} of the contract sets
forth the procedure regarding completion of the contract and
“non-conforming work” as follows:
(B} Final Acceptance. Upon notification from the Contractor
of completion of the project, the Engineer will make an
inspection. lf the Engineer finds the work completed
according to the contract, the inspection is final. The
Department will notify the contractor in writing of its
acceptance as of the date of the final inspection.
The Engineer will notify the Contractor in writing if
the inspection discloses non-conforming work. fha
Contractor shall correct and complete the non-conforming
work. Upon completion the Contractor shall notify the
Engineer. The Enqineer shall make another inspection. If
the Engineer finds the work completed according to the
contract, the inspection is final.
(Emphasis added.)
V.
This court has stated that “[w]hen construing a
statute, our foremost obligation is to ascertain and give effect
to the intention of the legislature, which is to be obtained
primarily from the language contained in the statute itself.”
CrosbV v. State Dep’t of Buddet & Fin., 76 Hawafi 332, 340, 876
P.2d l300, 1308 (1994) (internal quotation marks and citation
omitted). Courts “must read statutory language in the context of
the entire statute and construe it in a manner consistent with
its purpose.” Franks v. Citv & Countv of Honolulu, 74 Haw. 328,
335, 843 P.2d 668, 671 (l993) (citation omitted). Furthermore,
“[t]he courts may resort to extrinsic aids in determining the
legislative intent . . . [and] [o]ne avenue is the use of
legislative history as an interpretive tool.” Carl Corp. v.
State Dep’t of Educ., 93 Hawaid.l55, l72, 997 P.2d 567, 584
(2000) (citation omitted).
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A.
As noted §upra, the procedure for resolving contract
“controversies between a governmental body and a contractor” is
set forth in HRS § l03B-703 as follows: (l) “[t]he chief
procurement officer, the head of a purchasing agency, or a
designee of either office is authorized,[M] prior to
commencement of an action in a court concerning the controversy,
to settle and resolve [the] controverSyl/]” HRS § l03D-703(b);
(2) “ii]f . . . a [breach of contract] controversy is not
resolved by mutual agreement, the [State] shall promptly issue a
decision in writinQ[/]” HRS § l03D-703(c); (3) this decision is
“final and conclusive unless . . . the contractor commences a
judicial action in accordance with section 103D-7l1[,]” HRS
§ l03D-703(e); (4) “[i]f the [State] does not issue the written
decision under subsection (c) . . . after written request for a
final decision, . . . then the contractor may proceed as if an
adverse decision had been received[,]” HRS § l03D-703(f);
(5) “[a] person[“] aggrieved by a decision issued pursuant to
section l03D-703 . . . may initiate an action under section 661-
l{,]” HRS § lO3D-711 (emphases added).
HRS § 103D-704 (Supp. 1997), entitled “[e]Xclusivity of
remedies,” states that “[t]he procedures and remedies provided
“ The State does not specifically identify who in this case was
authorized to resolve the retainage controversy, Nevertheless, because Koga
filed its Claim with the Engineer, it is presumed that the Engineer would also
be the “designee of either office” who would resolve the controversy.
“ ln 1999, HRS § 103D-711 was amended, inter alia, to read as
follows: “(a) Only parties to the contract aggrieved by a decision issued
pursuant to section l03D-703 by a state chief procurement officer or a
designee may initiate an action under section 661-1.” 1999 Haw. Sess. L. Act
l62, § 9 at 537.
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for in this part, and the rules adopted by the policy office,
shall be the exclusive means available for persons aggrieved
in connection with a contract controversy, to resolve their
claims or differences.” {Emphasis added.) Thus, construing HRS
§ l03D-704 in pari materia with HRS § 1039-703, it would appear
on the face of the statutes that the procedure established in HRS
§ 1030-703 was the “exclusive means availab1e,” HRS § l03D-704,
for Koga to resolve the retainage controversy prior to filing
suit on the retainage matter.
B.
The legislative history confirms this reading of the
statute, In enacting Act 8, which established HRS chapter 103D,
the legislature's intent was to create “a single source of public
procurement policy to be applied equally and uniformly to the
State and counties.” Act 8, § l, 1993 Special Session Laws of
HawaiH4 at 37. One of the purposes of Act 8 was “to promote
economy, efficiency, and effectiveness in the . . . construction
of public works[.]” ld; at 38. Writing in regard to S.B. S3-93,
the bill which became Act 8, the Senate Committee stated that it
was adopting the recommendation of “public procurement eXperts”
that the Procurement Code “be updated to centralize the process
and provide for increased accountability and efficiency.” S.
Stand. Comm. Rep. No. 88-93, in 1993 Senate Journal, at 39.
According to the Senate Committee, “[f]or written contract
disputes, both the governmental body and the contracting party
may proceed in circuit court after the Chief Procurement Officer
renders a decision.” ld. at 40 (emphasis added). The House
55
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Committee stated that 83-93 “ip]rescribes remedies and provides
mechanisms for the resolution of disputes relating to . . .
contract performance[.}” H. Stand. Comm. Rep. No. 311-93, in
l993 House Journal, at 64. The legislative history supports the
view that the legislature intended to establish a uniform and
exclusive procedure for resolving contract disputes before suit
is filed.“
Vl.
The State has not indicated exactly the subsection of
HRS § 103D-703 Koga violated. The State claims that “the
retainage claim was never submitted” to the State for
administrative review. Koga’s Application makes reference to
“negotiations . . . regarding the issue of Koga’s unpaid
retainage,” citing as support the court’s finding no. 305 that
“[i]n 1999, [the] State proposed giving Koga a rebate due to
punchlist {work] on the sidewalks, curbs and gutter.” The State
has not disputed that such “negotiations” occurred with Koga
regarding the retainage, and thus it would appear that the
parties were attempting to “settle” a “controversy” as required
under HRS § 103D-703(a).
“ The ICA recently decided Communications-Pacific lnc. v. Citv &
County of Honolulu, --- HawaiU.---, --- P.3d ---- (App. 2009), 2009 WL
4250778, in which Communications-Pacific (Comm-Pac) argued that the circuit
erred in ruling that it was “barred from seeking judicial review of its claims
based on the language of the statue governing the procurement process and
interpretive case authority.” ;Q; at *3. The lCA held that HRS chapter 103D,
the Hawafi Public Procurement Code (Procurement Code), barred Comm-Pac “from
bringing a lawsuit against the City seeking damages sounding in tort for
injury suffered as a result of the City's alleged violations of the
Procurement Code.” ;Q; ln arriving at this conclusion, the ICA held that the
“plain language of HRS § l03D-704 precludes resort to other remedies for
injuries that arise in connection with those specified areas” of “solicitation
or award of a contract, a suspension or debarment proceeding, or a contract
controversy[,][ ] to resolve their claims or differences.” lg4 at *4
(internal quotation marks omitted).
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?ursuant to HRS § lO3D-7G3(f), “[i]f such a controversy
is not resolved by mutual agreement,” as it obviously has not
been in this case, Koga was required to make a “written request
for a final decision” on the issue of retainage. However, Koga
provided no indication in the record that it ever made such a
request pursuant to 1030-703(f). lt does not seem that a
“decision in writing” was ever issued by the State in regard to
retainage under lO3D~703(c). The statute does provide that “[i}f
the [State] does not issue the written decision . . . within
ninety days after written request for a final decision,
then the contractor may proceed [with suit] as if an adverse
decision had been received.” HRS § lO3D~703(f). But as
indicated, there does not appear to be any evidence that a
request to the State for a final decision as to retainage was
made by Koga.
VII.
Pursuant to HRS § lO3D-703(f), if Koga did not make
“written requests for a final decision,” it could not “proceed as
if an adverse decision had been received[,]” and therefore, Koga
could not seek relief in the court on its claim for retainage.
§§e HRS § lO3D-704. Because this argument was raised for the
first time in the State’s Response, an order for a supplemental
memo by Koga was filed.
VIII.
A.
In its supplemental memorandum, Koga argues first that
“[t]he relevant facts do not fall within the scope of HRS
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§§ lO3D~703 and l03D~704” because “there are no claims . . . in
connection with a ‘contract controversy{.}'” However, as Koga
notes, “[a] ‘controversy' is defined as: ‘[a} litigated question;
adversary proceeding in a court of law; a civil action or suit,
either at law or in equity; a justiciable dispute.” (Quoting
Black's Law DictionarV 298 (5th ed. l96B).). Koga’s claim for
retainage was obviously a “litigated question” or “justiciable
dispute,” because Koga argued before the court that it was
contractually entitled to the retainage, while the State argued
that it had “the contractual right to withhold the retainage[.]”
Thus, contrary to Koga's argument, its claim for retainage was a
“contract controversy” that fell within the scope of HRS § lO3D~
703.
B.
Second, Koga argues that based upon the findings and
conclusions of law (conclusions), “it is obvious that any pursuit
as to administrative remedies would have been futile as the State
was clearly not willing to pay . . . until and unless the Koga
claim was sustained on appeal.” Koga maintains that “the outcome
ll
¢
of any attempt to ‘settle and resolve' the issue was
“predetermined,” because “[t]he State has twice conducted []
inspections [of Koga’s work], and subsequent to the second
inspection in 2004, proposed reducing Koga’s retainage by more
that $60,000. Koga felt this was unacceptable given [Panem’s]
admission that Koga’s work was ‘lOO%’ completed.”
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C.
as noted before, section lO5.l7(B} of the contract sets
forth the procedure regarding completion of the contract and
“non~conforming work.” To reiterate, pursuant to section
l05.l7(B), see §gpra, Koga notified the State of the “substantial
completion” of the Project by a letter dated October 4,l999, in
which hogs stated that “[t]his letter is written to notify you
that [Koga] is substantially complete with the [Project] as of
Friday October l, l999.” As a result of this notification, the
State conducted an inspection on November l2, l999, and notified
Koga of the results by facsimile on November l5, l999. The
facsimile contained a cover letter stating that “[a]ttached is a
copy of the [p]unchlist from the walkthrough held on November l2,
l999 for your corrective action as required. . . . Please note
that the punchlist does not include change order work currently
being routed for approval . . . and change order work noted
during the walkthrough.” The facsimile included the punchlist,
which listed 52 items of work for which “corrective action” was
required. Based on the non-conforming work identified in the
punchlist, the State set a retainage amount of $l45,250.00.
lt appears that the State also “proposed giving Koga a
rebate due to punchlist [items] on the sidwalks, curbs and
gutter.” But “Koga did not accept the rebate, choosing instead
to perform corrective work on the punchlist items.” Thus, there
is no evidence in the record that Koga disagreed with the State's
determination that non-conforming work existed on the Project.
59
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The next interaction between the parties was a
facsimile from Koga to the State on December 2, 2004, in which
Koga “informed” the State “that items 30, al, 50, 53, 54, 56, &
57 on the final punchlist{“] has [sic] been completed as of this
date. Please acknowledge completion of these items and contact
me should you have any questions.” After the State received
Koga's December 2, 2004 facsimile, “{a] second inspection was
conducted by Quiamas on behalf of the [State] on December 9,
2004.”
Based on the second inspection, Quiamas concluded that
Koga had completed all but five items on the punchlist. As
indicated before, in a facsimile entitled “Punchlist Status
Update” dated December 9, 2004, Quiamas informed Panem that “Koga
has previously indicated that they will work directly with [the
State] to resolve [the] items” that Quiamas had determined were
not complete.
w As noted before, on December l4, 2004, the State
prepared Progress Payment No. 36 that appeared to release to Koga
some of the retainage withheld by the State. According to the
completed blanks, the “Work Completed” was “l00.0%” and, as noted
before, the “Payment now Due” was “$82,487.89,” and the
“Retainage” was “$62,762.ll.” Koga does not dispute that it
received Progress Payment No. 36, but felt this was unacceptable
“ Although the punchlist attached to the November l5, 1999 facsimile
from the State to Koga listed only 52 items, as noted supra, the cover sheet
to the facsimile stated that the punchlist did not include certain “change
order” work. Thus, it appears that other work items were added to the
punchlist at a later date.
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given the Engineer’s admission that Koga's work was “lO0%”
completed.”
D.
hoge relies on Poe v. Hawaii Labor Relations Bd., 97
Hawaiu_528, 537, 40 P.3d 930, 939 (2002). wpa involved a
contract that set forth a four-step process for the filing of
grievances by public employees against their employer, the State
of HawaiUM lg;_at 532, 40 P.3d at 934. In QQe, an employee who
had filed a grievance completed the first three contract steps,
but did not complete the fourth, because it involved an
arbitration procedure that only his union was authorized to
initiate, and the union had refused the employee’s request to
initiate arbitrationl ld; at 537, 40 P.3d at 939. This court
held that “[b]ecause [the employee] could move no further in the
grievance procedure, he had exhausted his administrative
remedies. Requiring him to repeatedly request the [union] to
pursue his grievance would be futile.” ldL at 538, 40 P.3d at
940. §
In §Qe, the employee was able to establish futility
because his union had already refused his request to enter into
arbitration; any further requests would undoubtedly have been
similarly denied. In this case, however, up to and including the
time that Progress Payment No. 36 was issued, the State had
simply been operating within the terms of section l05.l7(B) by
“notify[ing] the Contractor in writing if the inspection
discloses non-conforming work.” After the first inspection, the
State withheld $l45,250.00 in retainage, and after the second
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inspection, the State indicated that it was releasing 57% of the
retainage amount to Koga, while continuing to withhold $62,762.ll
in retainage. Progress Payment No. 36 on its face may appear
contradictory, in that it stated that the “Work Completed” was
\\
l00% ” yet it also continued to withhold retainage.”
1
Nevertheless, unlike in §Qe, if progress could not be made in
resolving the dispute, HRS § l03D-703 provided that Koga request
in writing that the State issue a final decision in order for it
to file suit. The parties were already engaged in litigation,
and the State’s decision to defend itself against Koga on the
retainage issue after it became clear that Koga would raise it
before the court does not establish the “futility” of the
administrative remedy in HRS § l03D-703.
IX.
A.
Third, Koga argues that it “twice requested the State
to make a decision on its retainage claim when it sought the
State's final acceptance of Koga’s work and final payment under
section l05.l7 and l09.l0 of the [c]ontract.” According to Koga,
“[t]he State never adequately responded to Koga’s requests, much
less provide a response within the ninety days set forth in HRS
§ 1030-703.”
_ Koga asserts that (l) “[a]t this point, the State had
the option of ([a]) terminating the {c]ontract pursuant to
" The State maintains that under the contract Progress Payments are
only “estimates.”
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[s]ection l0S.09[“] or (§b]§ attempting to settle the claim with
Koga pursuant to HRS § l03D-703{,j” (2) “{i]nstead, the State
simply allowed Koga’s claim to remain dormant, and Koga was
required to wait until the State took any step which would have
permitted its claim for retainage, either under Section [} l08.09
or HRS § l03D-703[,]” and {3) “Koga therefore would have been
permitted to proceed as though an adverse decision had been
rendered based upon the State’s failure to take either action.”
But Koga provides no authority for this statement, and indeed, it
appears incorrect in light of the statutory procedure set forth
above,
As to the State’s purported option to terminate the
contract, such option existed within the terms of the contract
itself, and operates independently of HRS § lO3D-703. Thus,
whether or not the State terminated the contract pursuant to
section l08.09 appears irrelevant to whether the procedure set
forth in HRS § l03D-703 was followed in this case. As to the
“option” of “attempt[ing] to ‘settle and resolve’ the controversy
w Section lO8.09 of the contract provides in relevant part that
[i]f the Contractor . . . performs the work unsuitably or
neglects or refuses to remove materials or to perform anew
such work as may be rejected as unacceptable and unsuitable,
or . . . [f]or any other cause whatsoever, fails to carry on
work in an acceptable manner, the Engineer will give notice
in writing to the Contractor and its surety of such delav,
neglect or default.
The Director mav, when the interests of this State so
reguire, terminate this contract in whole or in part, for
the convenience of the State.
(Emphases added.)
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pursuant to HRS § l03D-703[,}” such “option” would no
longer exist once a contractor has made a request for a written
decision, as Koga appears to claim it made in this case. This is
because HRS § lO3D-703 provides that if the contract “controversv
is not resolved by mutual agreement,” the State “shall promptly
issue a decision in writing.” HRS § lO3D~703(c) (emphasis
added). Therefore, it appears that at the time the written
decision is issued under HRS § l03D~7G3(c) or requested under HRS
§ lO3D-703(f), the time to “settle and resolve” the controversy
has passed.
Turning specifically to Koga’s assertion that “[t]he
State never adequately responded to [its] requests” that “the
State [] make a decision on [Koga’s] retainage claim when it
sought the State's final acceptance of Koga’s work[,]” it is not
evident what specific actions the State could have undertaken
that Koga would deem an “adequate[] respon[se].” Koga does not
set forth a standard by which to determine whether the State's
actions constituted an “adequate[] respon[se].” In this case, as
discussed at length §up;a, pursuant to Koga's October 4, 1999
letter and December 2, 2004 facsimile to the State regarding the
Project, the State conducted two inspections, the first within a
month-and-a-half of the letter, the second within a week of the
facsimile.
ln regard to the first inspection, by complying with
the requirements of section lO5.l7(B), and making a determination
to withhold retainage as authorized under section lO9.09(A)(3),
it would appear that the State's “response” to Koga’s October 4,
64
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l999 letter was “adequate.” The record also establishes that the
State’s second inspection disclosed non~conforming work.
However, unlike the first inspection, it does not appear that the
record contains a facsimile or letter addressed directly to Koga
indicating that non~conforming work items remained on the
punchlist. Nevertheless, the language in the Punchlist Status
Update, see supra note §2, stated that “[b]y way of this
facsimile, I’ll inform Koga to recheck fan area covered in
runoff]," and the fact that it appears that Sakaitini was copied
on the Punchlist Status Update, is evidence that Koga did receive
the Punchlist Status Update indicating that the State had
determined that non-conforming work items remained on the
Project. In any event, Koga does not argue that it did not
receive the facsimile, nor does it claim that any apparent
failure of the State to send the facsimile to Koga establishes
that the State's “response” was “inadequate.” Thus, it appears
that pursuant to the relevant provisions of the contract, the
State responded appropriately to Koga's “requests.”
B.
Koga also appears to contend that its two requests that
the State conduct a final inspection amounted to “written
request[s] for a final decision” pursuant to HRS § lO3D~703(f).
As to the October 4, l999 letter, this seems to be the first
communication from Koga to the State indicating that Koga was
“substantially complete with the [Project].” But at that time,
Koga was simply notifying the State, as it was required to do
under section lO5.l7(B) of the contract, that the Project was
65
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complete. ln this case, at the time Koga sent the State the
October 4, l999 letter, there is no evidence that a “contract
controversy” in regard to the retainage existed, and therefore,
the October 4, l999 letter cannot be interpreted as falling
within the meaning of HRS § l03D~703(f).
Nor does it appear that the the December 2, 2004
facsimile was a “written request for a final decision.” As
discussed above, the December 2, 2004 Koga facsimile indicated
“that items 30, 4l, 50, 53, 54, 56, & 57 on the final punchlist”
had been completed. During his deposition, Panem testified the
punchlist was still subject to final inspection.” Although
unclear, it appears that Panem was referring to purported
completion of all the items on the punchlist, rather than just
those noted by Koga in the December 2, 2004 facsimile.
Therefore, the December 2, 2004 facsimile appears to amount to
“notification from the Contractor of completion of the project,”
as contemplated in section l05.l7(B) of the contract.
Although HRS § l03D-703(f) does not set forth
requirements for the form of a “written request for a final
decision,” it would seem that such a request must indicate to the
State that a “final decision” as contemplated under HRS § l03D-
703(c) and (f) was being sought. ln this case, however,
construing the December 2, 2004 facsimile from Koga and Panem’s
deposition testimony, the December 2, 2004 facsimile only serves
as “notification” under section l05.l7(B) of the contract that
Koga completed the Project. lt does not indicate that Koga and
the State had been unable to reach a “mutual agreement,” and that
66
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Koga now sought the Stste’s written “final decision” so that Koga
could “initiate an action under section 66l~li,}” HRS § l03D~7ll.
Furthermore, “notification” that Koga had completed the
Project made pursuant to section l05.l?(B) of the contract cannot
be interpreted as a “written request for a final decision”
because the State’s response to a “notification” is governed by
the contract. ln other words, when the State receives notice of
completion of the Project, section l05.l7(B} requires the State
to “notify the Contractor in writing if the inspection discloses
non-conforming work.” Nothing in section l05.l7(B) requires the
State to include the information required under HRS § l03D~
703(c)” in its “noti[ce] to the Contractor” of non~conforming
work. Because 0ontract section l05.l7(B) and HRS § l03D-703(c)
require different responses from the State, in this case, Koga’s
December 2, 2004 facsimile cannot be interpreted as
simultaneously being “notification from the Contractor of
completion of the project” and a “written request for a final
decision.” Therefore, it does not appear that Koga’s December 2,
2004 facsimile was a “written request for a final decision” as
required in HRS § l03D-703(f).
X.
As noted above, Koga did not directly address “the
issue of whether the procedure set forth in [HRS] § l03D-703 is
mandatory, and thus determinative of jurisdiction in the
” To reiterate, HRS § l03D-703(c) provides that “[t}he decision
shall {] [s]tate the reasons for the action taken; and [i]nform the contractor
of the contractor's right to initiate a judicial action as provided in this
part.”
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[court],” as requested in the August l2, 2009 0rder. lt is
concluded that because (l) it appears that “the procedure
established in HRS § l03D-703 was the ‘exclusive means available'
for Koga to resolve the retainage controversy based on a breach
of contract,” {2) Koga did not avail itself of these “exclusive
means,” the court lacked jurisdiction to decide Koga’s claim for
retainage,
Xl.
Because the court was wrong in granting Koga’s motion
for partial summary judgment, the lCA gravely erred in affirming
partial summary judgment to Koga. Furthermore, the lCA gravely
erred in affirming the court’s decision as to damages to Koga and
in reversing the portion of the court’s October 24, 2006 final
judgment related to retainage, as the court did not have
jurisdiction over the retainage claim.” Accordingly, the ICA’s
judgment is vacated, the court’s October l5, 2003 Order granting
Koga’s motion for partial summary judgment is vacated, and the
case remanded for a determination of whether the State was
prejudiced by Koga’s Claim. In addition, the portion of the
court’s October 24, 2006 final judgment regarding retainage is
w lt should be noted that the State's lack of jurisdiction argument
was not raised before the court or the lCA. Subsequently, Koga should be
allowed to file its written request with the chief procurement officer for a
final decision as to the retainage claim, as such a request was ostensibly
rendered unnecessary by the court’s assertion of jurisdiction over the claim.
Additionally, inasmuch as the retainage amount of $l45,250 arose after the
suit had been filed and was litigated, and the State had already approved of
$62,762.ll of that amount, no prejudice redounds to the State by such a
filing.
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remanded to the court with instructions to dismiss that claim for
lack of jurisdiction.
Rebecca A. Copeland,
Deputy Solicitor General
(Mark J. Bennett,
Attorney General,
Glenn I. Kimura, Michael
Q.Y. Lau, and Sonia Faust,
Deputy Attorneys General on
the briefs; Mark J. Bennett,
Attorney General, Dorothy
Sellers, Solicitor General,
and Rebecca A. Copeland,
Deputy Solicitor General,
on the application), for the
State of Hawafi.
Bert T. Kobayashi, Jr.
(Ronald T. Ogomori, Nathan
Yoshimoto, and Brendan
S. Bailey on the
brief; Bert T. Kobayashi,
Jr., Christopher T.
Kobayashi and Maria Y.
Wang on the application
and response) of Kobayashi
Sugita & Goda, for
Koga Engineering &
Construction, lnc.
69
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