Case Title: 808 Development, LLC v. Murakami. S.Ct. Order of Amendment, filed 09/07/2006 [pdf].

Citation: 111 Haw. 349

Docket Number: 

State: hawaii

Court: Hawaii Supreme Court

Date: 2006-08-14T00:00:00Z

Document:
LAW LIBRARY.
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IN THE SUPREME COURT OF THE STATE OF HAWAT'T

---000.

 

 

808 DEVELOPMENT, LLC, Lienor-Appellant /Cross-Appellee,

 

ud 9002

GLENN NOBUKI MURAKAMI and ANN SUE ISOBE,
‘Respondent s-Appellees/Cross-Appellants,

 

and

JOSEPH E. SPADARO aka JOSEPH ELIO SPADARO, =| 9 S
individually and as Trustee under that certain
Declaration of Trust dated October 3, 2000,
JOHN NELSON SPADARO; JIM HOGG; LISA HOGG; and
AMERICAN SAVINGS BANK, F.S.B., Respondents-Appellees,

  

and

JOHN DOES 1-10; JANE DOES 1-10; DOB PARTNERSHIPS 1-10;
DOE CORPORATIONS 1-10; DOE ENTITIES 1-10; and
DOE GOVERNMENTAL UNITS 1-10, Respondents.

  

 

No. 26610

APPEAL FROM THE PIRST CIRCUIT COURT
(4.1, NO. 04-1-0002))
AUGUST 14, 2006
MOON, C.J., LEVINSON, ACOBA, AND DUFFY, JJ.; AND
INTERMEDIATE COURT OF APPEALS ASSOCIATE JUDGE WATANABE,
IN PLACE OF NAKAYAMA, J., RECUSED

OPINION OF THE COURT BY MOON, C.J.

Lienor-appellant 808 Development, LLC [hereinafter, 808

Development] appeals from the Circuit Court of the First
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SSS

ing 808

   

Circuit's! (1) July 20, 2006 final judgment disms
Development's mechanic's lien application (hereinafter, lien
application] made against property owned by respondents-appellees
Glenn Nobuki Murakami and Ann Sue Isobe {hereinafter
collectively, Owners] and (2) October 28, 2004 amended final
Judgment granting costs to Owners in the amount of $2,399.21.

owners cross-appeal from the circuit court’s October 28, 2004

 

amended final judgment denying their request for attorneys’ fees.
‘The instant action also named, inter alia,’ respondent-appellee
American Savings Bank (ASB), which allegedly held @ security
interest in the property as one of Owners’ lenders. The circuit
court dismissed the lien application on the sole basis that 608
Development had not complied with the statutory notice
requirenents for contractors regarding lien and bond issues under
Hawai'i Revised Statutes (HRS) § 444-25.5 (Supp. 2000), quoted
intra.

On appeal, 808 Development asserts that the circuit
court erred in dismissing its lien application because: (1) it
disregarded the legislature's intent in enacting Hawaii's
mechanic’s lien statute, HRS § 507-42 (1993), quoted infra, and
HRS § 444-25.5; (2) ite ruling is inconsistent with Hiraga v.

\ the Honorable Victoria S. Marks presided over the proceedings

 

2 me action was also brought againet respondents-appellees Jim ané
Lisa ogg, as well ae John and Joseph Spadaro, ail of whom were only minimally
Thvoivedsin the cireuit court proceedings and did not submit answering Briefs
on appeal

 

 
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Baldonado, 96 Hawai'i 365, 31 P.3d 222 (App. 2001); and (3) the
dismissal of ite lien application was “absurd and unjust." 808
Development also asserts that the circuit court erred in denying
its request for a continuance of the probable cause hearing on
the lien application pursuant to HRS § 507-43(a) (1993)° and
Hawai'i Rules of Civil Procedure Rule (ERCP) Rule 56(£) (2004) .*
In their cross-appeal, Owners assert that the circuit
court erred in denying their request for attorneys’ fees pursuant
to (2) BRCP Rule 11, which was based on their allegation that 808
Development's filing of its lien application was “frivolous,
wholly lacking in any factual or legal support” and (2) HRS
§§ 607-14 (Supp. 2004), quoted infra, and -14.5 (Supp. 2004),
quoted infra, as the prevailing parties and as against frivolous

claims, respectively. Based on the discui

 

ion below, we affirm

 

the circuit court's July 20, 2004 final judgment dismissing 608

Development's lien application and October 28, 2004 amended final

 

judgment denying Owners’ request for attorneys’ f

    

) was § $07-43(a) provides in pertinent part that:

‘The Application [for a mechanic's lies) and Notice
shall be veturnable not less than three nor more than ten
Gaye after service. Gn the return day. a hearing shall be
held by the court to detersine whether probable cause existe
fo persit the lien to attach... The return day hearing
may be continued at the order of the court so chat the
entire controversy need not be determined on the originally
Scheduled return day

 

 

+ wacp Rule 56(f) provides in pertinent part that the circuit court may

sorder a continuance to permit affidavits to be obtained or depositions to be
taken of discovery to be haa[.]"

 
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1. BACKGROUND

A. Eactual History

the following salient facte are undisputed. Michael
Sakatani is the sole menber of 808 Developnent. Sakatani and
Murakami were menbers of Kiwi Kahala, LLC (Kiwi), @ limited
Liability company that was formed to purchase, develop, and ell
high-end real estate, Other Kiwi enbers included Kenneth Vu and
Nacto Lathrop. In late 1999, Kiwi purchased real property
Jocated at 4902 Kahala Avenue (hereinafter, the subject property)
in vu'e name, which Kiwi planned to develop. on April 6, 2000,
Kiwi hired 808 Development to construct @ high-end residence on
the subject property. Construction began on July 31, 2000. on
october &, 2000, Owners acquired title to the subject property
from Vu. Pursuant to a construction agreement, dated January 1,
2002, Oxners hired 808 Development to construct improvenents on
the subject property for $1,630,500; construction purauant to
January 1, 2002 agreement began at sone point thereafter, the

January 1, 2001 construction agreement did not include written

 

notices and disclosures regarding lien and bond issues

required under HRS § 444-25.5."

 

+ an ite memorandum in opposition to Omers’ motion to dismiss the lien
application, #08 Development stated that the original construction contract
between 608 Development and Kivi was signed in 2000; however, the first page
Of the contract, slong with the architect specifications, vere later replaced
Sith pages dared in 2001 co satisty potential lenders. According to £08
Development, the original pages that were renoved froz the 2000 contract were
Giscerded. £06 Development concedes that “the (2000) contract dia not contain
fhe lien and boné disclosures required under HRS § 444-255." Thus, che
Existence of the original 2000 contract between Kivi and 08 Development ia of

(continued --)

 

 

 

 
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808 Development alleges that, on August 30, 2001, 808
Development and Owners entered into an amended construction
agreement that addressed the lien and bond issues. However,
Owners denied entering into an amended agreement, and 608
Development was unable to produce a signed amended contract.
According to 808 Development, it stopped work on the project
after Owners allegedly failed to pay as required by the
construction agreement. 808 Development alleges that Owners owe
$1,830,500.00 “less payments made" for materials, equipment, and
labor costs incurred through April 30, 2003. Owners allege that,
because the “payments made” total more than two million dollars,
they do not presently owe any money to 808 Development. It ie
unclear from the record the actual amount presently owed by
owners, if any, to 808 Development.
B. Procedural History

On January 16, 2004, 808 Development initiated the
instant mechanic’s lien action by filing its lien application
with the circuit court. Owners and ASB were served with a notice
of the lien application that indicated a return date of January
22, 2004. On January 26, 2004, 808 Development filed a notice
that a probable cause hearing was set for March 2, 2004. On

February 4, 2004, 808 Development moved to continue the probable

*(. continued)
no consequence £0 the instant sppesl. Thus, hereinafter, any reference to the
Construction agreement oF contract neans the January 1, 200) contract between
Owners and 202 Developnent’

 
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cause hearing, pursuant to HRS § 507-43 (a) and HRCP Rule 56(f),
see supra notes 3 and 4, arguing that it required additional time
to complete discovery and prepare for the hearing. The
continuance was denied, and the hearing proceeded as scheduled on
March 2, 2004.

Meanwhile, on February 10, 2004, Owners moved to
Gismiss the action for lack of subject matter jurisdiction,
purouant to, inter alia, ERCP Rule 12(h) (3) (2008),* for failure
to comply with HRS § 444-25.5, and requested attomeye’ fees and
costs against 608 Development. On the sane day, Owners filed a
certificate of service, indicating that they had served a notice
on 608 Development of their intent to file a motion for HRCP Rule
21 sanctions against 808 Development and ite attorney.

At the probable cause hearing on March 2, 2004, the
circuit court also heard argument on Owners’ motion to dismiss
the lien application. During the hearing, ASB informed the court
of a companion case involving 608 Development and Owners in which
the equitable interest of 808 Development was at issue. ASB
expressed its concern that, if the lien were permitted to attach
and relate back to the July 2000 construction date, ASB would
lose ite lien priority as holder of the first mortgage on the

property because it recorded the mortgage in October 2000. The

 

© MRCP Rule 12(h) (3) states that, “(w]henever it appears by suggestion
of the parties of otherwise that the court lacks Suriediction of the wubject
matter, the court shall dismiss the action.”

 
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court was also informed that a foreclosure action had been filed
and that Owners had obtained a $3.6 million dollar loan to “take
out all the liens to stop the foreclosure." ASB requested that
the court dismiss the lien application so as not to affect its
lien priority, noting that 608 Development could refile its lien
application at a later date if it found the signed amended
contract. The circuit court orally ruled in favor of Owners and
dismissed the lien application, but informed 808 Development that
“[i]t doesn’t affect your rights under quantum meruit. If you
can find a signed contract providing . . . lien and bonding
rights, you're free to refile." On May §, 2004, the order
granting Owners’ motion to dismiss the lien application was
entered, stating that 608 Development had “failed to present
evidence that it had complied with the written disclosure
requirement of [HRS § 444-25.5] as interpreted by the
Intermediate Court of Appeals [(ICA)] in Hixaga v. Baldonado, 96
Hawai'i 365, 31 P.3d 222 ({Alpp. 2001) [.]" In a separate order
entered on the same day, the circuit court denied Owners’ motion
for Rule 11 sanctions, stating that ‘it appears to the court that
[808 Development] . . . argued for a good faith extension of the
law eet forth in (Hixagal.”

on duly 20, 2004, the circuit court entered a final

judgment, dismissing 808 Development’s lien application, pursuant

 
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to HRCP Rule 58 (2004).” Thereafter, on July 30, 2004, Ownere
moved for an award of costs and fees in the anount of $38,183.25,
pursuant to HRCP Rules 7(b) and $4 (4) (2004)," and HRS § 607-14."
In addition, Owners separately moved for partial reconsideration
and/or clarification and/or to set aside and amend the July 20,
2004 final judgment with regard to an award of coats and

attorneys’ fees against 808 Development, purauant to the same

 

7 MRCP Rule 58 provides in pertinent part that *(elvery judgment shall
be tet forth on a separate document”

+ uncp Rule 7(b), entitled “Motions and other pape:
relevant part:

» provides in

 

(2) As application to the court for an order shall be
by motion which, une ring or trial,
shall be nade ih writing, shall state with parcicularity the
rounds therefor, and shall set forth the relief oF order
Soughe:

       

ia} “aia motions shall be signed in accordance with
ule 22

ERCP Rule 54(4) provides in pertinent part:

(2)_costs OTHER THAN ATTORNEYS" FEES. Except when
express provision therefor is nade either in a statute or in
Ehese rules, costs shall be allowed as of course to the
prevailing party unless the Court otherwise directs(.)

        

 

(capital letters in original.)
% uns § 607-14 provides in pertinent part:

Attorneys’ fees in actions in the nature of assumpeit,
ete. In ali the courts, in all actions in the nature of

jumpsit and in all actions on a promissory note or other
Contract in writing that provides for an attorney's fee,
there shall be taxed as attorneys’ fees, to be paid by che
losing party and co be included in the gum for which
execution nay issue, 2 fee that the court determines to be
yeasonable[-]

 

 

 

 

 

(emphasis in original.)
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authorities." On August 24, 2004, ASB submitted a memorandum

regarding Own

 

motion for attorneys’ fees, notifying Owners of
ite intent to demand that Owners reimburse ASB $2,000.00 for its
attorneys’ fees and costs incurred if Ownere prevailed on their
notion

on October 26, 2004, the circuit court granted in part
and denied in part Owners’ notion for reconsideration of the July
20, 2004 final judgment, awarding costs in the amount of
$2,399.31 and denying the request for attorneye’ fees. An
amended final judgment was also entered on the same day,
reflecting the award of costs and dismissal of all other clains.

on November 26, 2004, Ovners timely filed a notice of

appeal from the October 28, 2004 amended final judgment,

 

challenging the denial of its request for attorneys’ fees, which

 

was docketed

 

appeal No. 26972. 808 Developsent’s premature

notice of appeal, see supra note 10, is considered filed on July

 

% re should be noted that, on June 4, 2004, 608 Development appealed
the dioniasel of ite len application, which was docketed aa appeal Ros 26610,
price to the entry of the final Judgeent in this case. Moreover, the tine for
Fiifag the notice cf appeal wae extended as t result of the omers’ post”
judguent sotions. Havel Rules of appellate Procedure. (AD) Rule 40a) (2)
igese) "rf, not later than 10 daye after entry of final judgeent. any party
ties ‘notion that seeks to reconsider, vacate, or alter ehe jusguent, or
seeks attorney's fees or costa, the tine for filing the notice of appeal is
Extended unt! 0 days after entry of an Order disposing of the motient-]")
See also infra note 22.

Homers’ appeal is actually = cross-appeal to 908 Development's
sppesl in No. 26610. Gee HRAP 4.x(a) and (b) (2004). On Deceaber 34, 2004,
£08 Deveiopnent filed a notice of cross-appeal in appeal No. 2692, abpealing
the same octoner 28, 2004 order that it challenges in appeal Ho. 26620, which
ie eupertiucus.

     

 

 

 

 

 

 

 
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ee

20, 2004, when the judgment dismissing the lien application was
entered. RAP Rules 4(a) (2) and 4(a) (3).

IT, STANDARDS OF REVIEW

 

A. Motion for Sumary Judament’
A circuit court's grant or denial of summary judgment

is reviewed de nove, under the same standard applied by the

circuit court. Hawai'i Cmty. Fed. Credit Union v. Keka, 94
Hawai'i 223, 221, 11 P.34 2, 9 (2000) (citing Amfac, Inc. v.

Haikiki Beachcor Ww. Co., 74 Haw. 85, 104, 639 P.2d 10, 22,

reconsideration denied, 74 Haw. 650, 843 P.2d 144 (2992).

‘Ag we have often articulated[.1

[elummary judgnent ia appropriate if the pleadings,
Gepoeitions, anewers to interrogatories, ane
SSiseione co file, together with the affidavite, if
Sny. show that thefe ig no genuine issue as to any
material fact and that the soving party is entitied to
Jisguent as a secter of law
fact Le material if proof of chat fact would
have the effect of establishing or refuting one of the
feof action or defense
‘the evidence mst be
22 the non-neving

 

 

 
 
  
 
 
  

in pertinent part that, “{iJn any case in
ia filed prematurely, such sotice shall be

or Terediately after the time the judsnent becones final for
Borpakpene ce appeal.” Consequently, 008 Development's "anended notice of
Gpresl.? filed om August 10, 2008, is superfluous.

 

 

‘08 Development also filed a notice of pendency of action with this
court on october 26, 2004. On December 1, 2004, Owners eubsequently moved to
SWButoe ‘he notice Of pendency of action, which’ appellee John Spadaro joined
GPotienber 3.2004, this court granted the notin to expunge the notice of
Sonoesey of action via order entered on Pebruary 18, 2008 and amended on
Febraary 22, 2008. Thereafter, on March 4, 2005, this court, gua sponte,
ESheolideted appeal Noe. 26610 and 26972 under No. 26630.

 

 

1 anasmach as the probable cause hearing regarding #08 Developsent's
Lien application wae consolidated with the hearing on Owners’ notion to
Ustiaee the circuit coure considered evicence outside the pleadings
Sebting ite dieniscal nore akin to a grant of sumary judgment. Thus, the
Stupanrd of review for summery Judgment appears appropriate under the
Circumstances of this cas

 

 

 

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party. in other words, ve must view all of the
Rvidence ang the infercnces draws therefrom in the
SNoht moet favorable to [the party opposing the
notion}

 

Daixy Read Partners v. Island Ins, Co,, 92 Hawai‘; 398, 411, 992

 

P.2d 93, 106 (2000) (citations and internal quotation marks

 

omitted)
B. a 7

the interpretation of a statute is a question of law
reviewable de nove.” Gray v. Admin, Dix, of the court, 84

Hawai" 238, 144, 931 P.24 $80, $86 (1997) (internal quotation
marke and citations omitted).

ken construing # statute, our foremost obligation is
ko ascertain and give effect to the intention of the
Yegielature, which is to be obtained primarily from the
Jenguage contained in the statute itself. ard ve sust read
statutory language in the context of the entire statute and
Construe it in a manner consistent with ite purpose

‘When there s¢ doubt, doublenecs of meaning, oF
indiatinetiveness or uncertainty of an expression used in
statute, an ambiguity exieta[-)

Th Gonseruing an ambiguous statute, “(t]he weaning of
the ambiguous words may De sought Sy examining the context,
With which the ambiguous words, phrases, and sentences may’
be compared, in order to ascertain true seaning.* HRS
Sasi (2) 1(3993)]. Moreover, the courte say resort to
Extrineie aide in determining the legislative intent. One
fvenue ie the use of legislative history as an interpretive
tool

 

 

 

   

 

 

Aluminum Shake Roofing, Inc, v. Hirayasu, 210 Hawai'i 24)

 

251-52
131 P.3d 1230, 1233-34 (2006) (citation omitted) (format
altered) .

ia 8

 

A [circuit] coure’s decision to deny a request for a
continuance pursusnt to HRCP Rule Sé(f) will not be reversed
brent an abuse of discretion. Additionally, the request
must denonstrate how postponement of a ruling on the motion
will enable hin or her, by discovery or other neans, to
Tebut the movants’ showing of absence of a genuine issue of
fact. An abuse of discretion occurs where the (circuit)

 

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court hat clearly exceeded the bounds of reason or
Gieregarced rules or principles of law or practice to the
Substantial detriment of = party litigant.

 

Josue v. Isuzu Motors Am, Inc., 87 Hawai'i 413, 416, 958 P.2d
535, 536 (1998) (citations, internal quotations marks, and
brackets omitted)

D. Attorneye’ Fees

‘This court reviews a circuit court’s grant or denial of
fees under the abuse of discretion standard, Price vw.

attorney’

AIG Hawai'i Ine, Co,, 107 Hawai'i 106, 110, 111 P.34 2, 5 (2008),

 

requested pursuant to HRS §§ 607-14 and -14.5.

 

including fe
Piedvache v. Knabusch, 88 Hawai'i 115, 118, 962 P.2d 374, 377
(1998).
E. Rule 11 Motion

“ALL aepecte of a HRCP Rule 11 determination should be
reviewed under the abuse of discretion standard." Lapere v.
Inited Pub, Workers, Local 646, 77 Hawai'i 472, 473, 867 P.2d
1029, 1031 (1995) (citation omitted) .

XII, DISCUSSION
Mechanic's liens are purely statutory, and a lien will

not attach automatically. ack Endo Elec.

 

Inc., 59 Haw. 612, 615, 585 P.2d 1265, 1268-69 (1978). Hawaii
mechanic's lien statute, HRS § 507-42, provides in pertinent

part:

When allowed; lessees, ete. Any person or association
of persone furnishing labor of material in the improvenent
of Feal property shall have a lien upon the inprovenent at
Well as upon the Snterest of the omer of the improvenent in

 

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tthe real property upon which the eave is situated, or for
Eke benefit of which the same wae constructed, for the price
(it the price does not exceed the value of
RME'IGESE Shateateriais), or if the price exceeds the value
Uhereo! or if no price 18 agreed upon by the contracting

 

 

parties nd
Paterisle covered by thely contract, express Or implied.

(Gold emphasie in original.) (Underscored emphases added.)
However, under BRS § 444-25.5:

(a) Prior to enterina into a contract with =
honeomer shvelving hose construction of improvenente and
pricy to the application for building permit, licensed
Contractors shail:

a verbal homeowner a:

‘of ali parties performing under the
Gontract including the homeowner, the
Contractor, any subcontractor or any materisiman
Gupplying connedities or labor on the project,
(2) Euplain verbally sp detail the oseowner'e
gbtion te denand bonding on the project, how the
Bond would protect the Homeowner and. the

 

approximate expense of the bond; and
(3) Disclose ali information pertaining te the

ie ‘and any other
Felevant infornation that the (contractors
License] board may require by rule

@)
construction or -inprovenents shall provides written
‘he written contvact snail:
TST Contain the information provided in subsection
(a) and any other relevant information that the
board may require by rule;
(2) Be sioned by the contractor and the homeowners
and
o) Be ae mance of ams

(c) For the purpose of this section, “homeowner”
reane the omner or lessee of resigential real property,
Taeluaing owners or lessees of condominium or cooperative

 

 

“a
unfair or decestive practice and shall be subject £9
provisions of chapsar 480, a0 vel as the provisions of this
chapter.

(Emphases added.) The consequences of HRS § 444-25.5(d) fall
under (1) HRS § 480-2(a) (1993), which declares “unfair or
deceptive acts or practices in the conduct of any trade or

conmerce* unlawful and (2) BRS § 480-12 (1993), under which any

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contracts involving such unlawful practices are “void
and . . . not enforceable at law or in equity.” Therefore, based
upon the plain language of the above statutes, a contractor who
fails to provide written and verbal notice and disclosure of lien
vighte and bonding options to homeowners prior to entering into a
construction contract may not enforce the contract against the
owner and, consequently, is not entitled to a mechanic's lien
upon the property. Hiraca v. Baldonado, 96 Hawai'i 365, 371, 32
P.3d 222, 228 (App. 2001) (holding that a contractor who complied
with the requirements of HRS §§ 444-25.5 (a), but failed to comply
with the requirements of HRS § 444-25.5(b) was not entitled to a
lien on the property because “[t]he combination of BRS
§§ 444-25.5(d) and 460-12 caused the [construction] contract to
be void and . . . not enforceable at law or in equity" (internal
quotation marks omitted)). Keeping the aforementioned statutes
and principles in mind, we now turn to address the parties’
contentions.
A. 808 Development's Appeal
a. Whether the Circuit Court Erred in Diemissing

808 Development's Lien Application for Failure

to Comply with HRS § 444-25.5

808 Development contends that, despite its admitted
failure to comply with HRS § 444-25.5, the circuit court erred in
@ismissing ite lien application because: (1) it disregarded the
Hawai‘ legislature's intent in enacting Hawaii’s mechanic’s lien
statute and HRS § 444-25.5, as well as erroneously concluded that

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a

ies terms are mandatory; (2) its ruling was inconsistent with
Hixaga; and (3) the dismissal of the lien application was
sabsurd,* “unjust,” and inconsistent with legislative intent.
owners and ASB counter that the circuit court correctly disnissed
208 Development's lien application by strictly construing and
enforcing HRS § 444-25.5, consistent with the holding in Hiraga.
In the instant case, 608 Development furnished labor
and/or materials for the improvements on the subject property and
applied for a lien, pursuant to HRS § 507-42. Under HRS
§ 444-25.5(c), Owners owned the subject property and, therefore,
quality as “honeownere* entitled to the protections of the
statute. However, it is undisputed that 608 Development did not
provide to Owners the lien disclosure notices before or upon
signing of the contract or prior to the conmencenent of work as
required by HRS § 444-25.5(a). 808 Development's conduct was,
therefore, an “unfair or deceptive practice” that renders its
contract “void and. . . [unjenforceable at law or in equity”

under HRS § 480-12. See HRS § 444-25.5(a). Accordingly, based

 

on the plain language of the relevant statutes, 808 Development
is not entitled to a lien upon Owners’ property, and the circuit
court did not err in dismissing its lien application.

Nevertheless, 808 Development maintains that this court
should look to the legislative intent in enacting HRS § 444-25.5
because it believes, essentially, that the statutory requirements
are directory rather than mandatory. We, therefore, address

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whether the circuit court's dismissal vas contrary to the
legislative intent of the statute.

2. Whether the Dismissal of 808 Development's Lien
Application was Contrary to the Legislative Intent of
the Statute
a. wheth 4 a recto:

808 Developnent asserts that the circuit court erred in
strictly applying the statutory requirements to ite construction
agreenent. Relying on Jack Eno Elec., Inc. v. Lear Siesler,
inc., 59 Haw. 612, 585 P.2d 1265 (1976), 808 Development urges
thie court to examine the statute's legislative history to
determine whether the statute at issue is ‘mandatory or
directory."

ASB and Owners maintain that the circuit court's ruling
was wholly consistent with the plain language of HRS § 444-25.5
and that this court's decision in Jack Ende is consistent with
the circuit court‘s determination that 808 Development was
required to comply with the statute.

cHistorically this court has atrictly construed the
procedural requirements of the mechanic’s and materialman’s liens
law, while Liberally construing the remedial portions thereof.”
Moore v. Tablada, 62 Haw. 228, 229, 708 P.2d 140, 141 (1985)
(citing Hawai'i Carpenters’ Trust Funds v. Aloe Dev, Corp., 63
Haw. 566, 572-73, 633 P.2d 1106, 1110 (1981); Lewers & Cooke,
itd. vy. Wong Wong, 22 Haw. 765, 768 (1915)). As previously
indicated, HRS § 444-25.5 states that licensed contractors

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‘ghall” provide verbal notice and disclosure of lien rights and
bonding options and “shall” cbtain a signed writing that includes
the information explained verbally. Generally, the word ‘shall*

as used in statutes is construed as imperative or mandatory. see

eslie v. Bd. of Appeals of County of Hawai'i, 109 Hawai'i 384,
393-94, 126 P.3d 1071, 1080-81 (2006); Coon v. City & County of
Honolulu, 9¢ Hawai"! 233, 256, 47 P.3d 348, 372 (2002). In
certain situations, however, the word “shall” may be construed as

directory. See Jack Endo, 59 Haw. at 617, 885 P.2d at 1270.

(IE the provision ie mandatory, the failure to follow it
Will Fender the processing to which it relates illegal and
Void, “If the provision is directory, however, the
Sbeervance of the provision will not be necessary to the
Vallaity of the proceeding.

CYS" Tn determining whether a statute is mandatory or
Airectory{,] the intention of the legislature must be
ascertained. “The te

 

‘She_was-or the other. in general, a statute is directory
Father then Mandatory if the provisions of the statute do
not relate to the essence of the thing to be done or where

no_aubstantial ciahte depend on compliance with the
particular provisions and-no injury can reeult fros ienorine
hen.

Id, at 616-17, 585 P.2d at 1269 (citations, internal quotation

marks, and ellipsis omitted). In other words,

pose a

‘Sonsequences of noncompliance. A failure to follow the

former ta unattended by serious legal consequences

heglect of the latter say invalidate a transaction oF
‘here there

 

  

[Binge spon precise adherence to the law... . . And the word
“ehala® may be held to be nerely directory, when no

dndividual, by giving it that construction.

our
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Perry v, planning Comm'n of the County of Hawai'i, 62 Haw. 666,

676-77, 619 P.24 95, 103 (1980) (emphases added) (citations and
some internal quotation marks onitted).

tn Jack Endo, this court determined that a provision in
HRS § 507-43 (Supp. 1973) was directory. 58 Haw. at 618-19, 585
P.2d at 1270. HRS § 507-43 required any person claiming a lien
to provide a copy of the lien application and notice of lien
supon the ower of the property and any person with an interest
therein and upon the party or parties who contracted for the
improvenents[.]" The contractor had provided notice of the lien
application to the lessee of the property and the developer who
had contracted for supplies, but failed to provide notice to the
fee owner. This court held that:

(the contractor's) failure to name and serve notice of
the iien on the fee omer of the subject property resulted
[nexenpting the interest of the fee cwner fron the lien.
Consequently, the fee owner was not cubstantially prejudiced
by net rece(ving notice of the lies.” Thus, the notice
provision of BRS § 507-43 (Supp. 1973) calling for the
Faming and service of notice upon "the omer of fee title to
the property and upon the party or parties who contracted
for the improvenente sf other than the fee owner" ie
Elrectory rather chan mandatory. Further, the failure to
Strictly conpiy with the directory provisions of the statute
not invalidate the lien as to [the developer] and (the

© Tthe developer and the lessee] were properly naned
and served with notice of the lien. The lien is only
Etective as to their respective interests in the subject
property

 

 

  

 

       

 

(emphasis in original). In sum, the determination of whether

 

ERS § 444-25.5's requirements are mandatory or directory involves
a consideration of: (1) the nature and object of the statute;

(2) whether the provisions relate to the essence of the statute’s

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a

purpose; (3) the consequences of noncompliance; and (4) whether
the substantial rights of the parties depend on compliance with
the statute.

First, the provisions of HRS § 444-25.5(a) are
procedural and not renedial inasmuch as they relate to the
specific actions a contractor mst take to preserve its right to
alien. See Moore, 68 Haw. at 229, 708 P.2d at 141. Second, the
express purpose of HRS § 444-25.5 is to ‘have an inforned
homeowner who can and will avoid the double pay situations caused
when the homeowner pays the prime contractor, the prime
contractor does not pay the sub-contractors and/or materialmen,
and the latter assert their lien rights against the homeowner.”
flixaga, 96 Hawai'i at 369, 31 P.3d at 226 (citation omitted); see
sen, Stand. Con. Rep. No. 727, in 1975 Senate Journal, at 1104
thus, the statute's notice and disclosure requirements under HRS
§ 444-25.5(a) relate to the “essence” of the statute, i.e, the
education of homeowners. Third, the consequences to the
contractor for failure to comply with such requirenente are
unenforceability of the contract and exposure to the penalties
under HRS § 480-13 (Supp. 2000), which provides

suite by persons injured; amount of recovery,
Anjunctions.

‘bi Any consumer who ie injured by any unfair or
deceptive act or practice forbidden or declares unlawful by
section 480-2:

a) May eue for damages sustained by the consuner

tase, if the judgnest ss for the plaintiff, she
pls Shall be suarded a sun not less chap

 

peated be om

‘and

 

Euatained, whichever sun is the create

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reasonable attorneye’ fees together with the
coats of suet)

(Bold emphasis in original.) (Underscored emphasis added.) And,
finally, the substantial rights of the parties are affected
because a contractor's ability to attach a lien to the
homeowner’s property “depend[s] on compliance with the particular
provisions" of HRS § 444-25.5. Moreover, an injury that can
result from ignoring the statutory provisions is that 2 honeowner
wno has not been provided the requisite notice and disclosure may
have his or her property subject to a mechanic's lien that could
result in the homeowner being placed in precisely the kind of
double pay situation that the legislature intended to protect
against. Given the above factors, the express statutory
provisions of HRS § 444-25.5 should be construed as mandatory
rather than directory. The ICA reached the sane conclusion in
jlixaga. In that case, a contractor sought to impose a mechanic's
Lien against the homeowner's property. Although the contractor
admittedly failed to obtain a signed disclosure notice under HRS
§ 444-25.5, he argued that, because he had discussed lien and
bonding rights with the owner, the owner did not need the
protections of that statute, and, therefore, he was entitied to
mechanic's lien. The ICA acknowledged that the verbal disclosure
arguably met HRS § 444-25.5'e purpose of ensuring that honeowners
are educated to avoid facing double pay situations. Hirasa, 96

Hawai'i at 369, 31 P.3d at 226. However, the ICA concluded that:

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honeowner's signature on # written form containing specified
Information printed in specified size type. The oral and
written information pertain to the “lien righte of all
parties performing under the contract” and “the homeowner's
Bption co demand bonding on the project, how the bond would
protect the homeowner] and the approximate expense of the
Bonds" (ihe contractor] contents that the reuiresente of
bis is ely bet and

fhe contractor. However, even assuming no sub-contractors
Bie involved, there in no indication that no materialmen are
[ivolved. Moreover, HRS £ 444-25.5 does not exempt fron its

 

Jd, at 371, 31 P.3d at 228 (emphases added). The ICA further
noted that, even though the contractor was not entitled to a lien
against the property, it wae not completely without remedy
inasmuch as it was still free to pursue its clains in quantum
merit. Id. at 372, 31 F.3d at 229.

Here, as in Hixaga, the circuit court disnissed 208
Development's lien application, but acknowledged that it is
entitled to pursue ite quantum mexuit claims. 08 Development
contends that the circuit court's ruling is inconsistent with

Hixaga because it

 

xplicitly found that the construction
contract was not void.” Such contention lacks merit because the
circuit court did not so find, Rather, the court simply stated
that it was “not saying there's an unenforceable or void
contract” but that it was “saying @ lien doesn’t attach.” Thus
the circuit court limited ite ruling to a determination that the
Lien did not attach to the property but that 808 Development wai
entitled to pursue its claims in quantum neruit, which is
consistent with the holding in Hixaga. Accordingly, we hold that

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the circuit court properly dismissed 608 Development's lien

application purauant to the mandatory language found in HRS

§ 444-25.5.
b. whether the 3 +9 lien
ven the of ‘ding 1.
and_bonding issues

808 Development maintains that “the purpose [of HRS
§ 444-25.5] . . . is to educate homeowners about potential
‘double-pay’ situations and to reduce the number of claims
against the Contractor's Recovery Fund," and not to protect
cnon-paying homeowners" such as Murakami and Iscbe. 908
Development further asserts that Owners are not the type of
chomeownere’ the legislature meant for the statute to protect
because they are “sophisticated developer(s], fully educated
about lien and bond rights, who gave the contractor legal advice

for the contract at issue, to avoid payments [for] improvements

 

to [their] property." In support of its aforementioned
contentions, 808 Development relies upon Qverbers Decorating
center, Inc. v. Selbah Properties, 741 8.W.24 879 (Mo. Ct. App.
1987), for the proposition that strict compliance with HRS

§ 444-25.5 ie not necessary where the owner is sophisticated and

knowledgeable about lien and bonding issues.

 

Munger HRS § 444-26 (Supp. 2008), persons who have been injured by an
act, representation, transaction, of conduct of a licensed contractor which ie
{a'iilacion of Chapter 444, are allowed to recover damages fron the
Contractor's Recovery Fund in an ancunt not more than $12,500 per contract,
Gnd upon order by the elreuit court or district court.

 

 

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ASB asserts that, if this court were to permit the
attachment of 608 Development's mechanic’s lien, such holding
would create a vague case-by-case standard that is less practical
than the bright-line etandard eet forth by the ICA in Hiraga
because “homeowners do not divide neatly into two discrete
categories of ‘knowledgeable about lien and bonding rights’ and
snot knowledgeable about lien and bonding rights.’" ASB further
argues that HRS § 444-25.5 is a consumer protection statute and,
thus, it is designed to protect ‘all consumers, not just the

unsophisticated ones.” (Emphases in original.)

In its reply brief, 608 Developsent counters that, by
ruling in its favor, this court need not create a vague case-by-
case standard because the holding could be limited to the unusual
circumstances of the instant case.

The plain language of HRS § 444-25.5 does not provide
any exceptions to the statutory requirenents that would exempt
sophisticated homeowners or anyone else from its protections.
Moreover, 808 Development's reliance on Overberg does not support
its contention. In Qverberg, the Missouri Court of Appeals
allowed a mechanic's lien to attach despite the contractor's
failure to provide the omer with the required statutory notice.
Under the Revised Statutes of Missouri (RSMo) § 429.012, an
original contractor mist provide the owner with written notice
regarding lien rights prior to the first invoice as a condition

precedent to the validity of a mechanic's 1i

 

Overberg, 741

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§.W.2d at 680, In that case, the contractor agreed to deliver
certain labor and materials to the owher. The parties disputed
whether a contract provision discussing lien obligations
fulfilled the notice requirements. The Qverbera court concluded
that the contractor had “substantially complied" with the
statutory notice requirements and that it ‘went further by
providing the owner with protection from hidden liens.” Id. at
61. The court further noted that the owner was a sophisticated
corporation that the legislature did not intend to protect with
the notice requirements, but limited its holding to the
particular circumstances of that case. Id.

In White River Development Co, v. Meco Svstems, Inc.,
206 S.W.2d 735 (Mo. Ct. App. 1991) [hereinafter, White River],
the Missouri Court of Appeals addressed the effect of its prior
holding in Qverberg on a situation involving a contractor who had
not complied with the notice requirements and sought to assert a
lien against a knowledgeable developer. The white River court
noted that:

Meco [(the contractor)} admits that it did not give
the notice. Relying primarily upos. (Gerbera) , Meco
contends that a2 faite was a knowledgeable developer who
Understood the mechanic's lien 1 notice war sot
Eequired. Although Overberg contains language supporting
Neco’s position, there, notice
that required in the statute was given.

‘he Neco sugseate, the purpose of the statute is to
warn inexperienced property owners of the danger to then
Which lurks in the mechanics’ lien statute. Aowever, the
statute does not limit the necessity of this notice to thore
inexperienced with, or having lack of knoviedge about, the
mechanics’ lien lave.

 

 

 

ceptions. when statute se
without exceptions, courts should not create them. Allowing

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ease. the’ rig knowlease of the mechanic's Lien
Jag. it seems uniixely he legislature intended such
feault, as there are no limitations or exceptions to the
Giving of the notice, Meco is not entities toa mechanic's
Tien’

 

Id, at 730 (citations and internal quotation marks onitted)
(emphases added). In Gauey Excavating and Grading Co, v, Kersten
Homes, Inc., 924 §.W.24 303 (Mo. 1996) (en banc) [hereinafter,
Gauzyl, the Missouri supreme Court echoed the appeals court’s
holding in Mhite River. In Gauzy, a mechanic's lien was
invalidated over the contractor’s objection that its escrow

agreement with the developer provided “even greater protection

 

than that provided by the statutory notice." Id. at 305. In
requiring strict compliance with the statutory notice
requirements, the Missouri Supreme Court stated that:

Bven under Overberg, the original contractor mst provide
ti notice in writing and 2) notice that comports with ene
words used in the statute. Gauzy ((the contractor)] ‘failed
fo satiefy these conditions

‘As stated, the Court of Appeals enphasized chat ics
holding in Qverbera ehovld be Iimived to ies facts
We deciine to extend Overberg « ‘To do so would run
contrary to the longstanding precedent of requiring strict
Compliance with the statute. “that precedent is bared in
part on a concern that recognition of exceptions to the

ie ucehint cated in the areas of real sscare and
SStgtraction will Likely result ins plethora of case
Byrcase determinations. The bright-line rule mandated by
the statute gives the best guidance to owners and
contractors alike.

 

 

    

Id, at 305-06 (emphasis added) (citations omitted) .
In the instant case, as in White River and Gauzy, the
contractor, 808 Development, did not comply with or even
substantially comply with the statutory notice requirements for
mechanic's liens, In addition, like the Missouri statute, HRS

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§ 444-25.5 provides no limitations or exceptions to the notice

 

requirements. Therefore, we believe that the Missouri courts’
concerns that (1) “{a]llowing a lien when there was not
substantial compliance with [the notice requirements) would add

another issue to each mechanic's lien case,” White River, 606

 

$.W.2d at 738, and (2) the “recognition of exceptions to [HRS
§ 444-25.5) that excuse knowledgeable developers and others .
will likely result in a plethora of case-by-case
determinations |,]" Gauzv, 934 §.W.24 at 305-06, are applicable
here. Consequently, we decline to create an exception to the
clear statutory requirements of HRS § 444-25.5 and, instead,
adhere to a bright-line standard that provides clear guidance to
owners and contractors alike. Furthermore, as the circuit court
stated, 808 Development may still pursue its claims in quantum
neruit; therefore, 808 Development is not without a remedy.
Accordingly, we hold that the circuit court’s dismissal of 808
Developnent’s lien application was not “absurd and unjust.”

2. Whether the Circuit Court Erred in Denying 808
Development a Continuance Under HRCP Rule 56(f)

208 Development next contends that the circuit court
erred in denying ite motion for a continuance because “federal
courts, in dealing with the identical provision in Rule 56(f) of

the Federal Rules of Civil Procedure (FRCP), construe the rule

 

liberally.” 808 Development maintains that a continuance should

have been granted because Owners “had produced their discovery

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responses to 608 Development less than 24 hours before the
hearing on the motion to diemiss(, which, ae previously
indicated, was consolidated with the probable cause hearing on
the lien application) and that additional time was needed to
analyze the discover and present facte essential to 608
Developnent’s opposition* to the motion to dismiss (and,
presumably, in support of its lien application). 808 Development
alleges that it was prejudiced not only “by being denied adequate
Giscovery to oppose the motion to dismiss, but [alec] by losing
its own priority in the foreclosure action.”

Owners counter that 608 Developnent ‘was afforded much
more time than [HRS] § 507-43 actually prescribes.” Owners also
argue that the motion was inappropriately brought under HRCP Rule
56(f) when the dismissal was made pursuant to Rule 12(h) (3) and
was not a sunmary judgment motion under Rule 56(b). Ownere argue
that 808 Development's failure to investigate the facts prior to
filing ite lien application and requesting extensive discovery
after the fact wae a violation of ite lawyer’s professional

duties.

 

ASB agrees with Owners that the circuit court acted
within ite discretion in denying 808 Development's motion for a
continuance. specifically, ASB maintains that “608 Development
failed to identify information that it reasonably expects to
obtain through discovery that will assist in overcoming the
Motion to Dismiss." In addition, ASB contends that:

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806 Development's only specific argument was that additional
Siscovery misht ellow it co cetain a signed copy of the
Gmendnent to the construction contract, waich amendment
Ellegediy adaresced tien and bonding sesues . .- (but)
Eh(st]anendeent is irrelevant because it was fot entered
fnto, if at all, until afeer #08 (Development) had started
Construction on’the [e)ubject (plroperty. HRS § 444-25.5(b)
Fequires the notices and disclosures to be included in the
Contract before work starte. Ae a result, potential
Sincovery regarding this amendnent ie irrelevant to the
Seeue at hand.

 

 

 

HRS § 507-43 (a) provides in relevant part:

me for 9 sechanict
Save af ‘Sather
ro permit che Lies tc attach to the property. Any person to

‘Shor notice ig required to be given cnall be permitted to
ue of

 

Stfer testimony and docunentary evidence on the 1
Ghether probeble cause existe to permit the lien to attack
ihe rises elaine z

Ifenor or if any person to whon notice is Fequired to be
given otherwise a

ine nd receive a)

Sffered and shall only permit the attachment of « lien in
fhe net snount whieh che court determines if the reasonable
probable outcome of any such dispute

E snusa'at m
‘Srlainally scheduled return day. The lien shall not attach
SSithe property until the court finds probable cause existe
and #0 brdere.” No ach order shall be entered before the
Application aid Notice have been served on the party’
Contracting for the improvement, the general contractor and
the owner of the property, and they were given an
‘opportunity to appear at the Rearing.

(Bmphases added.) As previously noted, see supra note 13, the

circuit court’s dismissal was more akin to summary judgment

inasmuch as the court considered evidence outside the pleadings

when it consolidated the probable cause hearing with the hearing

on the motion to dismiss. Consequently, the rules applicable to

sunmary judgment are appropriate under the circumstances here.

With respect to continuances, HRCP Rule 56(f) state

 

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when affidavite are unavailable, should tt appear
from the affidavite of a party opposing the motion that the
party cannot for reasons stated present by affidavit facte
Sesential to justify the party's opposition, the court may
Fefuse the application for judgnent oF

Sontinuance to permit affidavits to be obtained OF
Seporitions to be taken or discovery to be hag.)

 

(Italics in original.) (Underscored emphases added.) Generally,
a motion to continue a hearing on a motion for summary judgment
vmust demonstrate how postponement of a ruling on the motion will
enable him or her, by discovery or other means, to rebut the
movants’ showing of absence of 2 genuine issue of fact. Josue
ys Ieuzu Motors America, Inc., 67 Hawai'i 413, 416, 958 P.2d 535,
536 (1998) (internal quotation marks and brackets omitted) .

Here, 808 Development initiated the mechanic’ lien
action on January 16, 2004, with a returnable date of January 22,
2004." The circuit court, as permitted under HRS § 507-43(a),

continued the probable cause hearing until March 2, 2004, a

 

Little over month after the return date. On February 4, 2004,
08 Development moved to continue the March 2, 2004 hearing,
arguing that the hearing would require “significant formal
discovery.” 808 Development also argued that, there would be

insufficient time for it to review respon:

 

to interrogatories

& ie ghoulé be noted that the return and acknowledgeent of service,
f4led Janvary 20, 2004, indicated that Omnere were served cn January 17. 4004
‘and that ASB was served on January 20, 2004. Inasmuch a HRS § 507-43,
Provides that™*(nlotice shall be Feturnable not less than three nor more than
Een days after service," it appears that service upon ASB was late, lies,
given the return date of Januaty 22, 2004, service should have been perfected
on or before January 19, 2004. However, the defect in service was not
Challenged by ASB below nor oh appeal. Nevertheless, on January 22, 2008, the
circuit court continued the probable cause Hearing to Maren 2) 2004 at the
Fequest for 808 Development. Thus, any alleged procedural defect was
hsrmiess.

 

  

 

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and request for production of documents, take depositions, secure
transcripts, and otherwise prepare for the March 2, 2004 hearing.
Specifically, 808 Development asserted (via counsel's affidavit),

Anker alia, that:

8. on January 29, 2004, (Ommers] served my office
with heir tvo volume mensrandum in response co Plaintiff
Sim wogg's Notion for Summary Judgment in Civil No.
dara-a7i2-08 (a related foreclosure case)

9. In Volume Two of that pleading, Exhibit ¢ containe
2 Liseiag of checks [Owners] claim were paid co [608
Developnent] for the construction work{.] (Hlowever, in
Order to determine what the checks were Used for and what
Sther paynents [068 Development] nade to Respondents Joseph
Spadaro, John spadaro, and Jim Mogg on behalf of [Owners],
it'has become necessary to do discovery of these cther
respondents

jal ‘mien sf respondents all stipulate to provide full)
and complete responses by February 10, 2004, there will be
Sneuificient tine to review the rea
Geporitions of Respondents, schedule
obtain written deposition transcripts, review the
Eranscripee and prepare the direct testimony, and prepare
for the [plzcbable (elause {hlearing on warch 2, 2004"

 

 

 

 

 
 

 

 

 

808 Development, however, failed to explain or describe how
additional discovery would enable it to overcome the fact that it
had not complied with the express statutory requirements of HRS

§ 444-25.5 such that probable cause would exist for the court to
permit the attachnent of a mechanic's lien on the property. As

previously indicated, the verbal and written notice requirements
prescribed under ERS § 444-255 must be perfected “upon or before
signing the contract." Thus, even if the additional discovery

sought by 808 Developsent resulted in the production of a signed
copy of the purported August 2001 amended contract and confirmed
that written disclosure of the lien and bond issues were met, the

amended contract would not have saved its lien application

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inasmich as construction had been ongoing since January 2002.
Accordingly, we hold that the circuit court did not err in
denying 808 Development's motion for a continuance and see no
reason to disturb its ruling.
B. Quners’ Cross-Appea,

Normally, pursuant to the "American Rule,” each party is

responsible for paying for his or her own litigation

expenses, This geseral rule, however, 18 ubject to a

funber of exceptions: attorney's fees are chargeable against

the opponing party when #0 authorised by statute, rule of
court, agreement, stipulation, or precedent.

 

 

 

Lee v. Aiu, @5 Hawai'i 19, 32, 936 P.26 655, 668 (1997)
(citations omitted). Owners assert that they are entitled to an
award of attorneys’ fees and costs pursuant to the following

three exceptions: (1) Rule 11 "as [808 Development] ’s filing of
its lien application was frivolous, wholly lacking in any factual

or legal support; (2) HRS § 607-14 as the prevailing party; and

 

(3) BRS § 607-14.5 as against frivolous clains.

 

MRS § 607-14.5 provides:

Attorneys’ fees and costs in civil actions. (a) In any
tArvaction in thie State where party seeks money darages
or injunctive relief, of both, ageinst another party, and
the case ie subsequently decided, the court my, as it deens
Suet, assess against either party, whether or not the party
ies a prevailing party, and enter ag part of ite order, for
eich execution may issue, a reasonable sus for attorneys"
fees and conte, in an amount to be determined by the court
pon a specific finding that all or a portion of the party's
Claim or defense was frivolous as provided in subsection
@.

 

 

 

(b) Im determining the avard of attorneys’ fees and
coste and the amounts to be auarded, the court must find in
Writing that all or a portion of the clains or defences mace
by the party are frivolous and are not reasonably supportea
by the facts and the law in che civil action. in
Getermining whether claine or defenses are frivolous, the
court may consider whether the party alleging that the
Claime oF defenses are frivolous bad submitted to the party
‘cont ited...)

   

 

 

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a. Rule 11 Motion

HRCP Rule 11 provides in pertinent part:

(b) Representations to court. By presenting to the
court (whether by signing, filing, subsitting, or later
Savocating) a pleadings, written motion, or other paper, an
attorney or Unrepresented party is certifying that to che
Bett of the person's knowledge, information, and belief,
formed after’ an inquiry reasonable under ehe circumstances:

(2) Se Ie not being presented for any improper
purpose, such as to harase or to cause unnecessary delay or
Reedlest increase in the cost of litigations

2)

2 ave warranted by existing law or by a sonfrivelous

fileting lew of the establiaheent of new Lavy

(GY the allegations and other factual contentions have
evidentiary support or, if specifically go identified, are
Likely to have evidentiary support after = reasonable
opportunity for further investigation or discovery: and

(4) the denials of factual contentions are warranted
on the evidence or, if specifically so identified, are
Feasonably besed on a lack of information or belief

(c) Sanctions. If, after notice and a reasonable
opportunity to respond, the court determines that

Subdivision (b) has been violated, the court may, subject to
‘the_conditions atated below, impose an appropriate sanction
‘Spon the attorneve, law time, or parties that have violates
‘subdivision bor are resnoneible for the violation.

(Italics in original.) (Underscored emphases added.)

 

 

 

 

¥(,. continued)
serving the claine or defenses a request for their

withdrawal as provided in subsection (c). If the court
Geternines that only @ portion of the claina or defenses
made by the party are frivolous, the court shall deternine a
Feasonable sum for attorneys’ fees and costs in relation to
the frivolous clains or defenses.

(c) A party alleging that claims or defenses are

 

 

 

‘a request for withdrawal of the frivolous clais
inwriting, identifying those claims or defer
and the reasons they'are believed to be frivi

party withdraws the frivolous claims or defe
Feasonable length of tine, che coure shall not award
attorneys’ fees and costs based on those claine or defent
Under this section

    

 

 

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owners naintain that 808 Developnent’s lien application
‘was frivolous[,] wholly lacking in any factual or legal
support." Owners argue that 808 Development viclated HRCP Rule
11 for the following reasons: (2) 808 Development was ‘allowed

months of extra time to hunt for a signed written [bond and lien]

 

Gisclosure” and failed to provide it at the hearing; (2) when
confronted with the ICA’s holding in Hixaga, it failed to addrese

it in ite reply; (3) when confronted with the express statutory

 

requirenents of HRS § 444-25.5 at the March 2, 2004 hearing, #08
Development’ counsel “claimed that he knew where written bonding
and lien rights disclosures signed by [Owners] could be found,”

yet he failed to produce them; and (4) "608 Development LLC is no
longer operating and is merely a ehell{;] [t}hus, unlese Rule 22

nections are issued, 808 [Development] and its counsel will

 

escape any consequences for [their] Litigation abuse."
808 Development denies that its lien application was
frivolous and argues that it did not violate the specific
conditions upon which sanctions can be ordered pursuant to Rule
11(b). 608 Development argues that the unproduced amended
contract did not demonstrate its failure to conduct reasonable
investigation because (1) it had an unsigned copy of the
agreenent and (2) Sakatani (the owner of 808 Development) averred
under penalty of perjury that an executed copy of the anended

contract existed. Additionally, 608 Development contends that

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os
the absence of a signed amended contract does not render the

entire lien application frivolou:

 

In adopting the abuse of discretion standard for

appellate review of Rule 11 sanctions, this court noted that:

 

First, a8 the Supreme Court noted in a
pale 11 inquiry ie heavily fact-intensive, requiring careful
Consideration of the particular cicunstances of each case,
Sea involving questions of ressonableness, creaibility and
Often, moive. 496 U.S. at 01-02, 1108. Ct. at 2459.
Because the [cireuit) court is betéer positioned than an
appeliate court te marshall and weigh the pertinent facte
[Pe dererninations are due a substantial degree of

ference, Gf. Gell vw. McCarthy, 72 Haw. at 26, 604 F.2d at
fe (where the court”
fects and circunstances of each individual cese, the ©
erroneous standara of review spplies.")

Second, we think Rule 1ivs mandate that attorneys and
parties Sirigate responsibly end in good faith will be
Yorthered by # unitary abuse of discretion standard of
review, Deployed on the front lines ef litigation, the
[circuit] court "ie best acquainted with the local bar's
ifelgacion practices and thus best eituated to determine
sthenva sonction is warranted to serve Rule 11°s gosl of
Gpecitic and general deterrence.” Ida, 496 U.s. at 404, 130
sect. at 2460. Abuse of discretion review is better suited
than devnova review ae a neans of ensuring that [circuit]
Gourte’ Role ii determinations will have veal teeth, thereby
Senhancling] these courte’ ability to control the litigants
before then.” 1d.

Matter of Hawaiian Flour Mille, Inc., 76 Hawai'i i, 15-16, 668

P.ad 419, 433-34 (1994).

    

 

 

 

‘As previously mentioned, the probable cause hearing was

scheduled for a little over one month after service of the lien

 

application, i.e., forty days. Thus, Owners’ suggestion that 608
Development had “months of extra time” to search for the
purported amended contract is somewhat exaggerated. In addition,
the circuit court denied Owners’ motion for Rule 11 sanctions

based on its finding that 808 Development had argued for a “good

faith extension of the law set forth" in Hiraga. In addition,

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808 Development's failure to discuss Hixaga renders its argunents
frivolous because Hiraga promotes strict adherence to the
requirements of the relevant statutes as they relate to a lien
application, whereas 808 Development's arguments centered on why
the court should exempt it from the strict statutory
requirements. Moreover, 608 Development took the position that
owners did not need the required notice and disclosures because
of their sophistication and knowledge of lien and bonding issues.
‘hus, 808 Development's failure to produce the amended contract
does not render its argunents frivolous as they were not premised
on the existence of the purported anended contract. Lastly,
there is nothing in the record to suggest that the circuit court
sclearly exceeded the bounds of reason” in refusing to sanction
208 Development. Accordingly, we hold that the circuit court did
not err in denying Owners’ Rule 11 notion.

2. HRS § 607-14

 

owners contend that HRS § 607-14 provides ‘another
statutory mechanism for reinbursing victims of frivolous lawsuits
as ‘prevailing parties’ where the underlying dispute is in the
nature of an agsumpsit claim." (Emphasis in original.) They
argue that the action ie an assumpsit claim because "808
Development filed a claim in an attempt to secure and to enforce
payment of an alleged contractual debt, by obtaining a secured

position, as the first step in its recovery of damages."

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808 Development responds that “[a]n application for a

mechanic’ lien ie not an action in the nature of assumpsit, but

 

rather ia a creature of the mechanic’s lien statute which mst be
strictly construed." Tt argues that the circuit court properly
Genied an award of attorneys’ fees because Owners brought their
claim for attorneys’ fees under the assumpsit statute, HRS
§ 607-14, not the mechanic’e lien statute, HRS § 507-47 (1993).17
808 Development further asserted that Owners were not entitled to
bring their claims under HRS § 507-47 because that statute
provides for an award of attorneys’ fees only for actions for
“foreclosure of a mechanic's lien filed in circuit court* and not
for “mere application of a mechanic’s lien.* (Emphases in
original.)

As previously quoted, HRS § 607-14 provides in

pertinent part:

Attorney's fees in actions in the asture of assumpsit, ete.
Teall the courte, in all actions in the nature of assumpeic

 

© RS § 507-47 provides in pertinent part that:

‘The court having jurisdiction of the action to
foreclose the lien shall have all of the powers pertaining
to courte of equity, and in addition may Girect the lesuance
Of a writ of sttactnent oF execution upon the notion of any,
party against the property of any other party, in the same
manner ae 18 provided in chapter 651 provided that the writ
shall only issue where the claim upon which the motion
therefor is based ie upon a contract, express or implied,

between the parties. in addition to costs of the action’ the
court may allow any fee or fees for lesa] services rendered
Sith atcorneya for ani-of the parties, aod apporcion the

Coste for paynent by and between the parties or any
Of thes, all af to the court seems equitable in che Light of
fhe services performed and the benefits derives therefrom by
the parties respectively.

 

 

 

(emphasis added.)
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a

land in ali actione on a promissory note gr other combract in
Gricine thet provides for an ateormey's fea, there shell be
HERD Ss attoreye’ fees, to be pase by the losing party and
EO%be included 1h the eum for which execution my issue, a
fee that the court determines to be reascnable(.)

 

(emphasis in original.) "Assumpsit is 4 common law form of
action which allows for the recovery of damages for
non-performance of a contract, either express or implied, written

or verbal,

 

well as quasi contractual obligations.” Blair v
Ing, 96 Hawai'i 327, 332, 31 P.34 184, 169 (2001) (citation,

internal quotation marks, and brackets omitted) (emphasis added) .

 

i

 

le, the lien application was brought pursuant to the
mechanic's lien statute and, as such, is not a conmon law action.

Moreover, the action was for the attachment of a mechanic’s lien

 

to the subject property, not for damages based upon the
underlying contract. Therefore, the action was not in the nature

of assumpsit; consequently, the circuit court did not abuse its

 

discretion in denying Owners’ motion for attorneys’ fees pursuant
to HRS § 607-14.
3, HRS § 607-24.5

owners contend that HRS § 607-14.5 provides a third
basis for an award of attorneys’ fees where clains made by the
other party are frivolous and not reasonably supported by the
facts and the law. Owners disagree with the circuit court's
finding that 808 Development made a “good faith argument for an

extension, modification or reversal of existing law" and argues

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that the finding doee not inmunize 806 Development from the

application of HRS § 607-14.5 because

 

no auch argument as to [iizaga) was made by 808
[Development] until after the lower court announced ite
Anelinstion at the March 2, 2004) hearing, and even then
the lover court was merely told that (#08 Development’ e]
Counsel needed nore time to subpoena a signed copy of the
So-called amended construction contract («1

 

808 Development counters that Owners’ claim for an
award of attorneys’ fees and costs pursuant to HRS § 607-14.5
should be disregarded because it was not first challenged in the
circuit court. specifically, 608 Development contends that

in their July 30, 2004 Motion for Reconsideration,
fomere] contended they had a “statutory right to sssuspsit
teen and coute as the prevailing parties in this ct
Poreuant £0° [ERS § 607°14)-" [Omers] nade no request for
Ettorneye” fees and coste. In their Motion for Attorneys’
foee filed on the sane day, [Owners] moved for recovery of
attorneys” fees and cost sccording to "the aseunpsit
Statute, Section 07-4," with no request for attorneys!
fees and costs pursuant to HRS § 607-14.5,

    

 

   

 

208 Development argues in the alternative that its claims were
not frivolous but were made in good faith.

808 Development's contentions accurately describe the
nature of Owners’ claims for attorneys’ fees under HRS
§ 607-14.5. At no tine did Owners file a claim for attorneys’

fees under that section; they fail to indicate in their opening

 

brief where the argument was brought to the attention of the
circuit court. We, therefore, decline to consider Owners’
argument with respect to HRS § 607-14.5. See HRAP Rule 26(b) (4)

(2004).

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qv. LS:
Based on the foregoing, we affirm both the circuit
court's July 20, 2004 final judgment and October 28, 2004 amended

final judgment.

on the briefs: Gyr

Karin L. Holma and

Amara Harrell (of Bays, Bice nae —

ear aren

reo ee ee eeeisant/

for event ae
€ Dues:

cross-appellants Glenn AA. Watan

Nobuki Murakami and
Ann Sue Isobe

Michael C. Bird and
Brandon U. Davidson,
for respondent -appellee
American Savings Bank

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