Court Opinion

ID: 4995014
Source: CourtListenerOpinion
Date Created: 2021-09-27 20:05:48.485376+00
Date Added: 2024-06-11T08:16:48.806749
License: Public Domain

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                                                               Electronically Filed
                                                               Supreme Court
                                                               SCWC-XX-XXXXXXX
                                                               27-SEP-2021
                                                               08:57 AM
                                                               Dkt. 36 MO

                             SCWC-XX-XXXXXXX

            IN THE SUPREME COURT OF THE STATE OF HAWAII

                    TED=S WIRING SERVICE, LTD.,
       Respondent/Plaintiff-Counterclaim Defendant-Appellee,

                                     vs.

          DEPARTMENT OF TRANSPORTATION, STATE OF HAWAII;
          Petitioner/Defendant-Counterclaimant-Appellant.

          CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
             (CAAP-XX-XXXXXXX; CIV. NO. 1CC131001910)

                         MEMORANDUM OPINION
(By: Recktenwald, C.J., Nakayama, McKenna, Wilson, and Eddins, JJ.)

           Petitioner/Defendant-Counterclaimant-Appellant

 Department of Transportation, State of Hawaiʻi (DOT) seeks review

 of the Intermediate Court of Appeals’ (ICA) February 4, 2020

 Judgment on Appeal entered pursuant to its December 26, 2019

 Memorandum Opinion.     The ICA vacated the May 20, 2016 Judgment

 of the Circuit Court of the First Circuit (circuit court).
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            This case arises from a contract dispute between DOT

and Respondent/Plaintiff-Counterclaim Defendant-Appellee Ted’s

Wiring Service, Ltd. (TWS).      DOT and TWS entered into a contract

for goods and services, wherein TWS agreed to build a ground

transportation tracking system for DOT at the Daniel K. Inouye

International Airport (“the airport”).         After TWS believed it

had fulfilled its obligations under the contract, DOT notified

TWS that it was not satisfied with TWS’s performance and

proposed withholding the remaining balance due to TWS under the

contract.

            TWS filed an action against DOT in the circuit court

to recover the remaining balance under the contract and DOT

filed a counterclaim for damages.        Both parties filed motions

for summary judgment.     The circuit court ruled in favor of TWS,

finding that there were no genuine issues of material fact and

concluding as a matter of law that TWS had completed the

contract and that DOT accepted the system built by TWS.            The

circuit court entered a single judgment in favor of TWS and

against DOT on all claims asserted in the action.

            DOT appealed to the ICA and argued that the circuit

court erred by (1) concluding that TWS was entitled to summary

judgment; and (2) disregarding the contract’s non-waiver

provision, which states that final acceptance by DOT does not

preclude it from recovering from TWS.        The ICA held that the
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circuit court erred by granting TWS’s motion for summary

judgment because genuine issues of material fact exist as to

whether TWS breached the contract, whether TWS satisfied its

contractual obligations, and whether DOT accepted TWS’s

performance.    Because the ICA concluded that there was a genuine

issue of material fact as to whether DOT accepted TWS’s

performance, the ICA declined to address the effect of the

contract’s non-waiver provision.         However, the ICA’s decision

included a footnote stating that DOT’s appeal did not challenge

the circuit court’s entry of judgment against it on its

counterclaim.   The ICA vacated the circuit court’s judgment and

remanded for further proceedings.

          In its application for writ of certiorari, DOT argues

that the ICA erred by stating that DOT did not challenge the

circuit court’s entry of judgment against DOT on its

counterclaim.    DOT maintains that it is still entitled to pursue

its counterclaim for damages on remand.         DOT argues that the

sole issue in this case is whether TWS satisfied or breached the

contract and that TWS’s claim for the contract balance and DOT’s

counterclaim for damages are intertwined.         DOT maintains that by

appealing the circuit court’s judgment in favor of TWS, it

appealed both the judgment in favor of TWS on its claim and

against DOT on its counterclaim.

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          We conclude that by appealing the circuit court’s

judgment, DOT appealed both the circuit court’s grant of summary

judgment in favor of TWS on its complaint and against DOT on its

counterclaim.   Thus, the ICA erred by stating that DOT did not

challenge the circuit court’s entry of judgment on its

counterclaim.   Because the ICA concluded that genuine issues of

material fact exist as to whether the parties modified the

contract and whether TWS performed under the contract, DOT is

entitled to pursue its counterclaim for damages on remand.

          Accordingly, we vacate in part the ICA’s

February 4, 2020 Judgment on Appeal as to DOT’s counterclaim and

affirm the ICA’s Judgment on Appeal in all other respects.             We

remand to the circuit court for further proceedings consistent

with this opinion.

                             I.   BACKGROUND

          In June 2000, TWS and DOT entered into a contract for

goods and services (“the Contract”), wherein TWS agreed to build

an Automatic Vehicle Identification system (“AVI System”) that

uses radio frequency technology to help manage commercial ground

transportation providers at the airport (“the Project”).            DOT

intended to use the AVI System, which consists of antennas at

the airport’s entrances and exits, computer hardware, and

software to track and meter ground transportation providers so

that DOT could send them accurate monthly bills.
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             The Contract specifically incorporated the request for

proposals (“the RFP”) issued by DOT, which set forth the

threshold requirements for the Project.            As relevant here, the

RFP required the AVI System to “provide an automated record

keeping and collection system capable of generating invoices and

reports to the user for confirmation of charges/withdrawals.”

The Contract required TWS to complete performance by installing

the AVI System within eight months of the date that DOT issued

the notice to proceed and then operating and maintaining the

system for an additional two years after installation.

             DOT issued the notice to proceed on December 15, 2000,

and the original completion date for the Project was

August 13, 2003.       However, work on the Project was delayed by

the September 11, 2001 terrorist attacks, unanticipated

difficulties in designing the AVI System, and difficulties in

obtaining DOT’s approval of the Concept of Operations (COP) for

the Project.1      DOT finally approved the COP on May 19, 2003.

             By letter dated May 27, 2003, TWS proposed changing

the hardware in the AVI System to a single server because

1     While the RFP laid out the threshold requirements for the AVI System,
the COP described in detail how the AVI System would operate and the methods
it would use. The COP was a document developed by TWS and the Project could
not begin until DOT approved it.
      In May 2002, DOT rejected TWS’s initial proposed COP because it did not
meet all of the specifications set forth in the RFP. DOT requested that TWS
resubmit a proposed COP for approval that included all of the RFP
specifications and reminded TWS that “any changes and/or adjustments to the
RFP requires that an [sic] Amendment or Change Order to the Contract.”
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technology had improved in the years since the Project was first

proposed and a dual server was no longer necessary.           DOT

responded to TWS in writing to acknowledge receipt of the single

server proposal, stating that it “ha[d] no additional input at

this time[,]” as “the proposed changes ought to meet the

specifications of your contract,” and DOT would “defer to your

knowledge and expertise.”      (Emphasis added.)

           By letter dated October 15, 2003, TWS clarified to DOT

the function of the AVI System software and specified the twelve

reports the software would generate.        On November 4, 2003, DOT

notified TWS that it approved of TWS’s description of the twelve

submitted reports.

           Because of delays, the parties agreed to extend the

deadline for installation and testing of the AVI System to

April 30, 2009.    By letter dated June 23, 2009, DOT declared TWS

to be in default of its obligations under the Contract for

failure to complete installation and testing by April 30, 2009.

DOT suspended work on the Project the following day.

           On October 13, 2009, Travelers Casualty and Surety

Company of America (Travelers), the Contract surety company,

entered into a Takeover Agreement with DOT to complete the

Project.   Travelers selected TWS to serve as the completion

contractor.

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             By February 2010, all of the hardware and software for

the AVI System was installed.          DOT indicated in a letter to

Travelers that the AVI System software was “evaluated and found

to be functional” and that the two-year operations and

maintenance period, during which TWS would provide support to

DOT, would commence on February 15, 2010.

             On February 15, 2012,2 DOT notified Travelers that it

was not satisfied with the functionality of the software because

of errors that occurred when DOT ran the billing report.                DOT

stated that it would not deem the Project to be complete until

the software issue was resolved.

             By letter dated March 27, 2012, DOT wrote to Travelers

to “acknowledge[] the completion of the two-year operations and

maintenance period as of February 29, 2012.”             However, DOT

stated that it was still not satisfied with the functionality of

the AVI System software, claiming that it did not satisfy the

RFP because it did not provide accurate reports.              Because DOT

did not believe that TWS could satisfactorily resolve the

software issues, DOT stated that it was “willing to accept the

installed system ‘as is’ and consider the Takeover Agreement

completed[.]”      DOT stated that it would withhold the outstanding

balance due under the Takeover Agreement and use those funds to

2     Because the two-year operations and maintenance period required by the
Contract commenced on February 15, 2010, the operations and maintenance
period was scheduled to conclude on February 14, 2012.
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“correct the issues with the current software on its own accord

with another software consultant.”

A.     Circuit Court Proceedings3

             On July 9, 2013, TWS filed an action against DOT in

the circuit court seeking to recover the remaining balance under

the Contract.      On July 31, 2013, DOT filed a counterclaim

against TWS for damages for lost revenue and expenses incurred

by DOT because the Project was not completed on time and the AVI

System software failed to function as expected.4

             On June 2, 2015, TWS filed a motion for summary

judgment on all claims asserted in its complaint and on all

counterclaims asserted by DOT.

             On September 11, 2015, DOT filed a motion for partial

summary judgment on all claims asserted in TWS’s complaint and

on all of DOT’s counterclaims for damages, except lost revenue

and additional security costs.

             The circuit court heard TWS’s motion for summary

judgment on September 9, 2015, and heard DOT’s motion for

partial summary judgment on October 7, 2015.

3      The Honorable Jeannette H. Castagnetti presided.

4     In its discovery responses, DOT divided its damages into four
categories: (1) additional expense to hire an outside contractor to supervise
completion of the Project; (2) additional security costs incurred because DOT
was unable to reduce security as planned, once the AVI System was
implemented; (3) the entire Contract amount; and (4) lost revenue because the
AVI System was not completed and operating by the original project completion
date.
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             During the October 7, 2015 hearing, the circuit court

ruled that TWS was entitled to summary judgment on its claim for

the outstanding balance due under the Contract because there

were no genuine issues of material fact.            The circuit court

concluded that TWS “completed the contract as extended and

modified by DOT and [TWS]” and “[TWS] performed under the

contract to the DOT’s satisfaction, as agreed and modified by

the parties.”      The circuit court further concluded that DOT

accepted the AVI System.

             As to DOT’s counterclaims, the circuit court orally

ruled that TWS was entitled to summary judgment based on the

circuit court’s conclusion that TWS did not breach the Contract.5

Finally, the circuit court concluded that because “[TWS] is

entitled to judgment as a matter of law on its claim for

retainage and amounts owing as well as the counterclaim asserted

by the [DOT], and the [DOT] would not, therefore, be entitled to

partial summary judgment as the [DOT] has moved for.”               (Emphasis

added.)

5     The circuit court also stated its conclusion that even if TWS had
breached, DOT did not have a valid claim for damages because (a) DOT did not
assert a claim for breach of contract based on any untimely performance;
(b) if DOT had asserted such a claim, it would not be valid because DOT
agreed to multiple extensions of the time of performance; (c) DOT did not
incur additional expenses to supervise completion of the Project based on
TWS’s conduct, but because DOT was understaffed; (d) DOT’s claim for lost
revenue lacked any legal basis because TWS was not obliged to provide DOT
with revenue from the AVI System; and (e) DOT’s claim for recovery of the
entire Contract price failed as a matter of law.
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           On November 12, 2015, the circuit court entered orders

granting TWS’s motion for summary judgment and denying DOT’s

motion for partial summary judgment.         The circuit court awarded

TWS the outstanding balance due under the Contract.

           On May 20, 2016, the circuit court entered final

judgment in favor of TWS and against DOT.

B.   ICA Proceedings

           DOT appealed the circuit court’s judgment to the ICA.

As relevant here, DOT argued on appeal that the circuit court

erred by (1) concluding, as a matter of law, that (a) the COP

changed the Contract specifications; and (b) that DOT accepted

the AVI System; and (2) disregarding the Contract’s non-waiver

provision, which states that final acceptance by DOT does not

preclude it from recovering from TWS.         DOT requested that the

ICA reverse the circuit court’s judgment in favor of TWS, enter

judgment in favor of DOT “as requested in [DOT]’s motion for

partial summary judgment,” and remand for a trial on DOT’s

damages.

           The ICA entered a memorandum opinion (MO) in which it

concluded that the circuit court erred by granting summary

judgment in favor of TWS because there were genuine issues of

material fact regarding whether the COP modified the Contract

specifications and whether DOT finally accepted the AVI System

under the terms of the Contract.         Because there was a genuine
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issue of material fact about whether DOT accepted the AVI

System, the ICA declined to address the effect of the Contract’s

non-waiver provision.     The ICA did not address the question of

whether TWS was entitled to summary judgment as to DOT’s

counterclaim, stating in footnote 6 of its MO: “TWS also argued

that it was entitled to judgment as to DOT’s counterclaim for

damages under the contract.       DOT has not challenged the Circuit

Court’s entry of judgment against it on its counterclaim on

appeal.”   (Emphasis added.)

           Accordingly, the ICA vacated the circuit court’s

May 20, 2016 Judgment in favor of TWS and against DOT and

remanded for further proceedings “not inconsistent” with its MO.

The ICA entered its Judgment on Appeal on February 4, 2020.

                            II.    DISCUSSION

           In its application for writ of certiorari, DOT argues

that the ICA erred by stating in footnote 6 of its MO that “DOT

has not challenged the Circuit Court’s entry of judgment against

it on its counterclaim on appeal.”        DOT contends that by

appealing the circuit court’s judgment in favor of TWS and

against DOT, it appealed all claims asserted in the action —

which encompassed both the award of the remaining balance of the

Contract in favor of TWS and DOT’s counterclaim for damages.

According to DOT, the sole issue in this case is whether TWS

performed under the Contract and the parties’ competing claims
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regarding whether the Contract was modified and whether DOT

accepted the AVI System are inextricably intertwined.               DOT

contends that footnote 6 contradicts the ICA’s conclusion that

TWS was not entitled to summary judgment because there were

genuine issues of material fact as to which party defaulted on

the Contract.      Accordingly, DOT maintains that it is still

entitled to pursue its counterclaim for damages against TWS on

remand.

             Conclusions of law are reviewed de novo under the

right/wrong standard of review.          Maria v. Freitas, 73 Haw. 266,

270, 832 P.2d 259, 262 (1992).          In this case, the ICA concluded

as a matter of law that the circuit court erred by granting

summary judgment in favor of TWS and against DOT because genuine

issues of material fact exist.          The ICA also concluded that DOT

failed to challenge on appeal the circuit court’s entry of

judgment against it on its counterclaim for damages.6              For the

following reasons, we agree with DOT that footnote 6 is wrong.

The ICA erred by concluding that DOT appealed only the entry of

judgment in favor of TWS on its claim and did not appeal the

circuit court’s judgment on its counterclaim.

6     We note that the ICA cited no basis for its conclusion in footnote 6
that “DOT has not challenged the Circuit Court’s entry of judgment against it
on its counterclaim on appeal.”

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             First, the circuit court issued a single judgment in

favor of TWS and against DOT “on all claims asserted in the

action.”7     Pursuant to Hawaiʻi Rules of Appellate Procedure Rule

3(c)(2) (2019), “[t]he notice of appeal shall designate the

judgment, order, or part thereof and the court . . . appealed

from[]” and “[a] copy of the judgment or order shall be attached

as an exhibit.”       (Emphasis added.)      In this case, DOT filed a

Notice of Appeal “from the [circuit court]’s JUDGMENT filed May

20, 2016” and attached a copy of the judgment as Exhibit 1.

Thus, DOT appealed the entire judgment, and its appeal

necessarily encompassed both the circuit court’s grant of

summary judgment in favor of TWS on its complaint and against

DOT on its counterclaim.

             Second, DOT’s appeal in no way indicated that it was

abandoning its counterclaim for damages.            Instead, in its

opening and reply briefs, DOT maintained its position that it

was TWS who breached the Contract.           DOT disputed TWS’s claims

that (1) the parties modified the Contract; (2) TWS performed

under the Contract, as modified; and (3) DOT issued a final

acceptance.      Thus, DOT’s arguments that TWS breached the

Contract and that DOT was entitled to damages were the same

7     Not only did the circuit court enter a single judgment, it also treated
TWS’s complaint and DOT’s counterclaim as a single issue by addressing their
cross-motions for summary judgment in one oral ruling and stating that “a lot
of the issues in both motions . . . just overlap.”
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arguments made by DOT for why TWS was not entitled to the

remaining balance under the Contract.        It follows that if there

were genuine issues of material fact as to which party breached

the Contract, DOT is entitled to pursue its claim for damages on

remand.

           Third, DOT specifically challenged on appeal the

circuit court’s failure “to give effect to the non-waiver

provision of the contract,” which is only relevant to DOT’s

counterclaim for damages.      DOT argued to the ICA that the non-

waiver provision entitled DOT to seek damages from TWS, even if

the circuit court found that TWS did not breach the Contract.

In addition, the relief that DOT requested on appeal was for the

ICA to reverse the circuit court’s judgment in favor of TWS,

enter judgment in favor of DOT “as requested in [DOT]’s motion

for partial summary judgment,” and remand for a trial on DOT’s

damages.   (Emphasis added.)

           Thus, DOT’s appeal of the circuit court’s judgment

encompassed both the entry of judgment in favor of TWS for the

remaining balance under the Contract and DOT’s counterclaim for

damages.   To the extent that the ICA concluded that DOT

failed to challenge on appeal the circuit court’s entry of

judgment against DOT on its counterclaim, the ICA erred.            The

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ICA vacated the circuit court’s judgment8 because it concluded

that genuine issues of material fact exist as to whether DOT

agreed to modify the Contract specifications and whether DOT

accepted the AVI System.         For that reason, DOT is entitled to

pursue its counterclaim for damages against TWS on remand.

                               III.   CONCLUSION

             Accordingly, we vacate in part the ICA’s

February 4, 2020 Judgment on Appeal as to DOT’s counterclaim and

affirm the ICA’s Judgment on Appeal in all other respects.                We

remand to the circuit court for further proceedings consistent

with this opinion.

             DATED:    Honolulu, Hawaiʻi, September 27, 2021.

John H. Price and                           /s/ Mark E. Recktenwald
William J. Wynhoff
for petitioner                              /s/ Paula A. Nakayama
Department of Transportation,
                                            /s/ Sabrina S. McKenna
State of Hawaiʻi
                                            /s/ Michael D. Wilson
Keith Y. Yamada,
Kelly G. LaPorte,                           /s/ Todd W. Eddins
Christopher T. Goodin,
and Trisha H.S.T. Akagi
for respondent Ted’s
Wiring Service, Ltd.

8     To “vacate” a judgment is to “nullify or cancel; make void; invalidate”
it. Black’s Law Dictionary 1862 (11th ed. 2019). Thus, because the ICA
vacated the circuit court’s judgment which disposed of DOT’s counterclaim for
damages, the judgment is void and DOT’s counterclaim necessarily survives.
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