Court Opinion

ID: 5134181
Source: CourtListenerOpinion
Date Created: 2021-12-10 22:02:50.760493+00
Date Added: 2024-06-11T08:23:42.243682
License: Public Domain

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                                                               Electronically Filed
                                                               Supreme Court
                                                               SCWC-XX-XXXXXXX
                                                               10-DEC-2021
                                                               09:03 AM
                                                               Dkt. 30 SO

                              SCWC-XX-XXXXXXX

          IN THE SUPREME COURT OF THE STATE OF HAWAIʻI
________________________________________________________________

              JOY P. LEONG AND STEPHEN B. LINDSEY III,
         Petitioners/Plaintiffs-Appellants/Cross-Appellees,

                                     vs.

                       HONOLULU FORD INC.,
         Respondent/Defendant-Appellee/Cross-Appellant.
________________________________________________________________

          CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
             (CAAP-XX-XXXXXXX; CIV. NO. 1RC14-1-7680)

                    SUMMARY DISPOSITION ORDER
 (By: Recktenwald, C.J., Nakayama, McKenna, and Wilson, JJ., and
    Circuit Judge Kuriyama, in place of Pollack, J., recused)

                             I.   INTRODUCTION

            This case arises from a dispute over the sale of a

used 2009 Shelby Cobra GT500KR, a limited edition of an exotic

Ford Mustang sports car (“Vehicle”), by Respondent/Defendant-

Appellee/Cross-Appellant Honolulu Ford, Inc.1 (“HFI”).            Following

     1      HFI asserts in its response to Buyers’ application for writ of
certiorari that “the Defendant/Appellee/Cross-Appellant in this case is a
dissolved entity and no longer a going concern” and therefore “it is unclear
what relief, if any, could be afforded by further review.” Despite HFI’s
contention that this case is “no longer a going concern[,]” Buyers are

                                                             (continued . . .)
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negotiations and the execution of two purchase agreements,

Petitioners/Plaintiffs-Appellants/Cross-Appellees Joy P. Leong

and Stephen B. Lindsey III (“Buyers”) took possession of the

Vehicle.    Although Buyers had raised concerns about the

Vehicle’s clutch during the test drives, it was not until Buyers

had the opportunity to drive the Vehicle home that they

concluded some aspect of the clutch assembly was defective.

Buyers returned the Vehicle to HFI after driving it for forty-

seven miles and asked HFI to repair the clutch free of charge.

HFI refused to repair the Vehicle at no cost to Buyers and,

following rescission of the purchase agreement, refused to

return Buyers’ $1,000.00 deposit because HFI claimed Buyers

caused the Vehicle to have a “burnt clutch.”

(...continued)

entitled to proceed in their action against HFI and may recover any award
from HFI’s designated trustees. Makaneole v. Pacific Ins. Co., 77 Hawai‘i
417, 420-21, 886 P.2d 754, 757-58 (1994).

            Statutes permitting suit against “dissolved” corporations
(“survival statutes”) generally permit individuals or entities to recover
from dissolved corporations. 36 A.L.R. 7th Art. 4 (2018). Hawai‘i’s survival
statute is no exception. Hawai‘i Revised Statutes (“HRS”) § 634-61 (1972)
provides:

                 The death of a plaintiff or defendant or the
                 dissolution of a corporate plaintiff or defendant
                 shall not cause an action to abate, but it may be
                 continued upon substitution of the proper parties as
                 provided by the rules of court, or if the claim is
                 one which survives to or against the surviving
                 parties the action shall proceed in favor of or
                 against the surviving parties as provided by the
                 rules of court.

HRS § 634-61.

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            Buyers asserted numerous claims alleging that HFI had

engaged in unfair or deceptive acts or practices (“UDAP”) when

it sold Buyers the Vehicle.       Buyers seek review of the

Intermediate Court of Appeals’ (“ICA”) affirmance of the

District Court of the First Circuit’s (“district court”) Order

Granting Defendant HFI’s Motion for Summary Judgment2 entered on

March 24, 2015 (“Summary Judgment Order”) and the Judgment3

entered on August 25, 2015 against Buyers on all remaining

claims.

            Among other claims, Buyers argue that HFI was

statutorily required to provide a warranty for the clutch

assembly in the Vehicle, but refused to do so, and instead,

misrepresented the nature of the damage that was found on the

Vehicle.    Following the rescission of the sales agreement,

Buyers allege that HFI improperly retained Buyers’ $1,000.00

deposit by claiming that Buyers destroyed the Vehicle’s clutch

assembly by driving the Vehicle for forty-seven miles.

            On certiorari, Buyers raise three main issues:

(1) whether the ICA was correct in ruling that summary judgment

was appropriately granted against Buyers’ claim that HFI

     2      The Honorable Michael K. Tanigawa presided over the summary
judgment hearing and entered the Summary Judgment Order.

      3     The Honorable Gerald H. Kibe presided over the trial and entered
the Judgment.

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violated HRS § 480-2 (2002), which prohibits unfair or deceptive

trade practices, by increasing the contract price by $1,800.47

above the price that had been negotiated; (2) whether the ICA

was correct in finding that HFI was entitled to retain the

$1,000.00 deposit to offset its costs in repairing the clutch;

and (3) whether HFI was statutorily required to repair the

Vehicle at no cost to Buyers.

          The district court erroneously interpreted

HRS § 481J-2 (2008)4 to conclude that the warranty for used motor

vehicles in HRS § 481J-2 does not cover a clutch assembly.              The

     4    HRS § 481J-2 (2008) provides in relevant part:

          Used motor vehicles: written warranty required, terms.
          (a) No used motor vehicle shall be sold in this State by a
          dealer to a consumer unless accompanied by a written
          warranty covering the full cost of both parts and labor
          necessary to repair any defect or malfunction in a part
          covered under subsection (c) that impairs the used motor
          vehicle’s safety or use. Defects and malfunctions that
          affect only appearance shall not be deemed to impair safety
          or use for the purposes of this chapter.

          . . . .

          (c) The written warranty shall require the dealer or its
          agent to repair or, at the election of the dealer,
          reimburse the consumer for the reasonable costs of
          repairing the failure of a covered part. Covered parts
          shall at least include the following items:

                (1) Engine, including all lubricated parts, water
                pump, fuel pump, manifolds, engine block, cylinder
                head, rotary engine housings, flywheel, gaskets, and
                seals;

                (2) Transmission, including the transmission case,
                internal parts, torque converter, gaskets, and seals,
                except four-wheel drive vehicles shall be excluded
                from coverage as provided for in this paragraph;

                                                            (continued . . .)

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district court also erred when it found that Buyers failed to

carry their burden of proving that the clutch assembly was

damaged or otherwise defective when they took possession of the

Vehicle.    These errors are due to a distinction between the

language that HFI used to describe the damage/defect that it

found on the Vehicle (a “burnt clutch”) and the actual repairs

that HFI eventually made to the Vehicle (replacement of the

entire “clutch assembly” including the pressure pad, slave

cylinder, and flywheel).         HFI was statutorily required to repair

the clutch assembly in the Vehicle without charge and, thus, was

not entitled to retain Buyers’ $1,000.00 deposit.

(...continued)

                 (3) Drive axle, including front and rear drive axle
                 housings and internal parts, axle shafts, propeller
                 shafts, and universal joints, except four-wheel drive
                 vehicles shall be excluded from coverage as provided
                 in this paragraph;

                 (4) Brakes, including master cylinder, vacuum assist
                 booster, wheel cylinders, hydraulic lines and
                 fittings, and disc brake calipers;

                 (5) Radiator;

                 (6) Steering, including the steering gear housing and
                 all internal parts, power steering pump, valve body,
                 piston, and rack; and

                 (7) Alternator, generator, starter, and ignition
                 system, excluding the battery.

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                        II.   STANDARDS OF REVIEW

A.   Summary Judgment

          We review the district court’s orders of summary

judgment under the same standard applied by the district court.

Makaneole, 77 Hawai‘i at 420, 886 P.2d at 757.          “Summary judgment

is appropriate where the moving party demonstrates that there

are no genuine issues of material fact and it is entitled to

judgment as a matter of law.”        Reed v. City & Cty. of Honolulu,

76 Hawai‘i 219, 225, 873 P.2d 98, 104 (1994).

B.   Statutory Interpretation

          The district court’s interpretation of a statute is

reviewed de novo.    State v. Pacheco, 96 Hawai‘i 83, 94, 26 P.3d

572, 583 (2001).

                              III.   DISCUSSION

A.   The ICA Did Not Err in Finding that There Was No Unfair or
     Deceptive Act or Practice Where Buyers Voluntarily Signed
     Contracts Agreeing to a Base Price of $41,800.47 for the
     Vehicle

          In order to obtain relief under HRS § 480-2,5 a

consumer must establish:       “(1) a violation of HRS § 480-2;

     5    HRS § 480-2 provides:

          Unfair competition, practices, declared unlawful

                (a) Unfair methods of competition and unfair or
          deceptive acts or practices in the conduct of any trade or
          commerce are unlawful.

                                                             (continued . . .)

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(2) injury to the consumer caused by such a violation; and

(3) proof of the amount of damages.”         Davis v. Wholesale Motors,

Inc., 86 Hawai‘i 405, 417, 949 P.2d 1026, 1038 (App. 1997).              A

trade practice violates HRS § 480-2 when “it offends established

public policy and when the practice is immoral, unethical,

oppressive, unscrupulous or substantially injurious to

consumers.”      Balthazar v. Verizon Hawaii, Inc., 109 Hawai‘i 69,

77, 123 P.3d 194, 202 (2005) (internal quotation marks omitted)

(quoting Hawai‘i Cmty. Fed. Credit Union v. Keka, 94 Hawai‘i 213,

228, 11 P.3d 1, 16 (2000)).       This court has held that “a

deceptive act or practice is (1) a representation, omission, or

practice that (2) is likely to mislead consumers acting

reasonably under the circumstances where (3) the representation,

(...continued)

                  (b) In construing this section, the courts and the
            office of consumer protection shall give due consideration
            to the rules, regulations, and decisions of the Federal
            Trade Commission and the federal courts interpreting
            section 5(a)(1) of the Federal Trade Commission Act (15
            U.S.C. 45(a)(1)), as from time to time amended.

                  (c) No showing that the proceeding or suit would be
            in the public interest (as these terms are interpreted
            under section 5(b) of the Federal Trade Commission Act) is
            necessary in any action brought under this section.

                  (d) No person other than a consumer, the attorney
            general or the director of the office of consumer
            protection may bring an action based upon unfair or
            deceptive acts or practices declared unlawful by this
            section.

                  (e) Any person may bring an action based on unfair
            methods of competition declared unlawful by this section.

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omission, or practice is material.”         Courbat v. Dahana Ranch,

Inc., 111 Hawai‘i 254, 262, 141 P.3d 427, 435 (2006) (cleaned up)

(quoting F.T.C. v. Verity Int’l, Ltd., 443 F.3d 48, 63 (2d Cir.

2006)).

           Here, Buyers argue that HFI violated HRS § 480-2 by

increasing the base price of the Vehicle from a negotiated price

of $40,000.00 to $41,800.47 in the first and second purchase

contracts without bringing the change in price to Buyers’

attention.    In granting summary judgment on this issue in favor

of HFI, the district court found that there was no question of

material fact that the alleged behavior did not constitute a

deceptive act or practice.       The ICA affirmed the grant of

summary judgment on the grounds that Buyers had voluntarily

signed two purchase agreements that readily identified the base

price of the Vehicle as $41,800.47.

           In HFI’s pre-trial Request for Admissions, completed

by Buyer Lindsey, Buyers “[a]dmit” that “[Buyers] agreed to

purchase the Vehicle for $49,262.83, including fees.”6            This

      6     The base price of the vehicle excluded fees and additional costs.
$41,800.47 was the base price used to calculate the total price of $49,262.83
for the vehicle purchase. Buyers allege that:

                 [they are] not saying that they did not agree to buy
           the car for a certain price, nor, for that matter, that
           they did not actually buy it at that price. They were
           saying that their agreement to buy at $49,262.83
           (originally $46,917.28) and their actual purchase at that
           price were obtained by fraud, in that they were tricked

                                                             (continued . . .)

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admission, coupled with the fact that Buyers signed two purchase

contracts agreeing to the base price of $41,800.47, demonstrates

that Buyers were aware that they were purchasing the Vehicle for

the price that appeared in the contract.          See Leong v. Kaiser

Found. Hosps., 71 Haw. 240, 245, 788 P.2d 164, 168 (1990)

(explaining that the “general rule of contract law is that one

who assents to a contract is bound by it and cannot complain

that he has not read it or did not know what it contained”).

Moreover, the purchase contracts signed by Buyers contained

merger clauses, stating that the contracts were complete and

final representations of the terms of the contracts.            Because

Buyers were, or should have been, aware that they were agreeing

to purchase the Vehicle for a base price of $41,800.47, the

alleged increase in price from the negotiated price of

$40,000.00 does not amount to a violation of HRS § 480-2 because

the act or practice was “[un]likely to mislead consumers acting

reasonably under the circumstances[.]”          See Courbat, 111 Hawai‘i

at 262, 141 P.3d at 435.       Accordingly, the district court did

(...continued)

            into signing the agreement to buy at that price through the
            process of (1) Defendant’s salespeople and Plaintiffs
            having successfully negotiated the price to be $40,000 for
            the car itself, followed by (2) Defendant’s substituting
            $41,800.47 as the “Base Price of Vehicle.” Defendant used
            the larger figure in calculating the “Total Price” on the
            “AUTOMOBILE PURCHASE AGREEMENT.” Defendant had a duty to
            disclose the change but remained silent.

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not err in granting summary judgment in favor of HFI as to the

question of whether HFI committed a UDAP violation related to

the sales price of the Vehicle.

B.   The Statutory Warranty Under HRS § 481J-2 Covers the
     Components of the Clutch Assembly and Required HFI to
     Repair Such Damage at No Cost to Buyers

          HRS § 481J-2 governs used motor vehicle sales and

warranties.   It requires the dealer to provide a written

warranty covering “the full cost of both parts and labor

necessary to repair any defect or malfunction in a part covered

under subsection (c) that impairs the used motor vehicle’s

safety or use.”    HRS § 481J-2(c) includes an enumerated list of

covered items:

          (c) . . . Covered parts shall at least include the
          following items:

                 (1) Engine, including all lubricated parts, water
                 pump, fuel pump, manifolds, engine block, cylinder
                 head, rotary engine housings, flywheel, gaskets, and
                 seals;

                 (2) Transmission, including the transmission case,
                 internal parts, torque converter, gaskets, and seals,
                 except four-wheel drive vehicles shall be excluded
                 from coverage as provided for in this paragraph;

                 (3) Drive axle, including front and rear drive axle
                 housings and internal parts, axle shafts, propeller
                 shafts, and universal joints, except four-wheel drive
                 vehicles shall be excluded from coverage as provided
                 in this paragraph;

                 (4) Brakes, including master cylinder, vacuum assist
                 booster, wheel cylinders, hydraulic lines and
                 fittings, and disc brake calipers;

                 (5) Radiator;

                 (6) Steering, including the steering gear housing and
                 all internal parts, power steering pump, valve body,
                 piston, and rack; and

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                  (7) Alternator, generator, starter, and ignition
                  system, excluding the battery.

HRS § 481J-2(c) (emphasis added).         The question of whether the

clutch assembly is covered under HRS § 481J-2(c) is fundamental

to the determination of Buyers’ claims.          Though the ICA did not

discuss whether the clutch assembly is covered under HRS § 481J-

2(c), the district court held in Finding of Fact (“FOF”) Number

(“No.”) 29 that “[m]anual clutch mechanisms are not included in

express warranties for used car sales under HRS § 481J-2.”              To

determine whether HRS § 481J-2(c) covered the clutch assembly,

the district court consulted the Merriam-Webster Dictionary as

to the definition of the word “clutch.”          Using the Merriam-

Webster definition, the district court determined in FOF No. 30

that “[t]he Merriam-Webster Dictionary denotes that a clutch

mechanism is situated between the engine and the transmission of

a motor vehicle”7 and explained that “the clutch is what’s

between the engine and what some people call the gear box, i.e.

transmission.     So I’m satisfied that, in common terminology, it

was not intended that clutch mechanisms be included within the

express warranty for used car sales.”         In FOF No. 32, the

      7     The district court noted at trial that the Merriam-Webster
Dictionary explained that “if you were in the British Isles, clutch would be
included in the drive shaft, the entire mechanism, but if you are in the U.S.
of A, the clutch is what’s between the engine and what some people call the
gear box, i.e. transmission.” Indeed, even by the dictionary definition
relied upon by the district court, the “drive shaft” is specifically
enumerated as a covered part in HRS § 481J-2(c).

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district court found that “[e]ven if the clutch was covered by

the warranty covering the Vehicle, HFI was not required to

undertake warranty repairs on the clutch in the event of abuse

or neglect” and “obviously it’s [Buyers’] burden to establish by

a preponderance that . . . [the clutch] wasn’t that way [(i.e.,

burned out)] before.”8      Accordingly, the district court concluded

that “as to the warranty issue, there is no unfair or deceptive

act or practice” because even if the clutch assembly was covered

under HRS § 481J-2(c), HRS § 481J-2(c)’s warranty would not

apply because Buyers failed to prove that they did not engage in

abuse or neglect that damaged the clutch.            As discussed below,

FOF Nos. 29, 30, and 32 are clearly erroneous.

            Statutory interpretation is a question of law that is

reviewed de novo.     Courbat, 111 Hawai‘i at 260, 141 P.3d at 433.

When 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.”      Id. (quoting Gray v. Admin. Dir. of the

Court, 84 Hawai‘i 138, 148, 931 P.2d 580, 590 (1997)).              HRS

§ 481J-2(c) is unambiguous as to whether it covers the

components of the clutch assembly--the “flywheel” and the

      8     As discussed infra,   it was error for the district court to place
this burden on Buyers, as HFI’s   claim that it was entitled to retain the
$1,000.00 deposit to offset the   cost of the repairs was in the nature of an
affirmative defense, the burden   of which was on HFI.

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“gaskets” and “seals” that failed in the slave cylinder--that

HFI replaced.    Accordingly, the district court’s reliance on the

Merriam-Webster Dictionary, and its FOF No. 30, was error.

           HRS § 481J-2 requires the dealer, here, HFI, to

provide a written warranty covering “the full cost of both parts

and labor necessary to repair any defect or malfunction in a

part covered under subsection (c) that impairs the used motor

vehicle’s safety or use.”       The plain language of HRS § 481J-2(c)

explicitly lists “covered parts” that include components of the

manual clutch assembly that were replaced by HFI.            It is

undisputed that HFI replaced at least the clutch pressure pad,

the slave cylinder (due to a failed rubber gasket), and the

flywheel in the Vehicle.       Explicitly listed among the covered

parts in HRS § 481J-2(c) are the flywheel, gaskets, seals, all

lubricated parts, internal parts, and torque converter.9

           HFI was explicitly required to cover the components on

the clutch assembly--“gaskets” and “seals” that failed in the

slave cylinder and the “flywheel”--that it replaced in the

Vehicle.   HFI mechanic and expert witness Henry Tabios

(“Tabios”) testified that a “slave leak” occurs in “the

hydraulic part of the clutch” and Buyers’ expert witness Kenneth

Moniz (“Moniz”) testified that such a leak would be caused by a
      9     An HFI expert witness stated in an interrogatory that a clutch is
part of a transmission; however, he changed his testimony at trial.

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leak in the “rubber seal, and most leaks [are] from wear and

tear.”    HRS § 481J-2(c) lists “all lubricated parts,” “internal

parts,” and lists “gaskets[] and seals” twice, under both

subsections (c)(1) and (c)(2).        Thus, the slave cylinder (or, at

the very least, the gaskets and seals that failed in the slave

cylinder) is covered under the statutory warranty.            See HRS

§ 481J-2(c).    HRS § 481J-2(c) explicitly requires a dealer to

warrant the “flywheel[.]”       Id.   It is uncontested that the

flywheel was damaged and had to be replaced.           Accordingly, the

flywheel is covered under the statutory warranty.            See id.

Although HRS § 481J-2(c) does not explicitly name the “clutch”

or “clutch assembly[,]” the statute’s reference to the “torque

converter” captures the statute’s intent to cover the equivalent

components in a manual transmission vehicle.           Buyers’ expert

witness, Moniz, testified that “the torque converter” in an

automatic vehicle “has the same function as a clutch” in a

manual transmission vehicle.        Therefore, the entire clutch

assembly (including the clutch pressure pad) is covered under

the statutory warranty, and the district court’s FOF No. 29 was

erroneous.10   See HRS § 481J-2(c).

     10     The interpretation of HRS § 481J-2(c)(2) could also rely on the
commonsense understanding of the word “transmission” as itself including the
“clutch assembly” in a vehicle with a manual transmission. While the clutch
mechanism sits in between the engine and the transmission, a reasonable
consumer is likely to read “transmission” as encompassing the clutch, given

                                                             (continued . . .)

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            The district court also erred in holding that Buyers

failed to carry “their burden of proving that the clutch

[assembly] was damaged or otherwise defective when they took

possession of the Vehicle.”       The placement of this burden on

Buyers was an error of law, and the district court’s FOF No. 32-

-that “[e]ven if the clutch was covered by the warranty covering

the Vehicle, HFI was not required to undertake warranty repairs”

because the Buyers failed “to establish by a preponderance that

. . . [the clutch] was burned out, burned, wasn’t that way

before”--was erroneous.

            Here, where HFI retained Buyers’ $1,000.00 deposit to

offset the costs of the “clutch assembly” replacement, the

burden was on HFI to prove that Buyers ruptured a gasket on the

slave cylinder and destroyed the clutch assembly in the span of

forty-seven miles, not as a result of “normal wear or usage[.]”

As discussed below, Buyers established by uncontested expert

testimony that a leaky slave cylinder cannot be caused by use or

(...continued)

the clutch mechanism’s essentiality in engaging and disengaging the
transmission from the drive shaft’s moving parts. Moreover, unlike HRS §
481J-2(c), other state statutes explicitly exclude parts of a vehicle that
wear out with ordinary use. See N.J. Rev. Stat. § 56:8-67(1) (2013)
(defining “covered item[s]” to exclude “a manual clutch, pressure plate,
throw-out bearings, clutch master or slave cylinders”) If the Hawai‘i
legislature intended to exclude “wear items,” such as the clutch, they could
have done so, but did not. As the commonsense understanding of
“transmission” includes the clutch in a vehicle with manual transmission, and
the Hawai‘i legislature did not exclude “wear items,” the clutch and clutch
assembly are covered by the warranty.

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misuse in forty-seven miles.        Accordingly, HFI could not have

established by a preponderance that Buyers damaged the clutch

due to “abuse or neglect” rendering the HRS § 481J-2(c) warranty

inapplicable.

           Accordingly, the district court’s FOF No. 28 (that

Buyers had “failed to sustain their burden of proof that the

clutch was damaged or otherwise defective at the time they took

possession of the Vehicle”) was clearly erroneous.            Likewise,

the ICA erred in finding that that FOF No. 28 was not “clearly

erroneous.”

C.   The ICA Erred by Finding that HFI was Entitled to Retain
     the $1,000.00 Deposit to Offset its Costs in Repairing the
     Clutch

           Buyers argue that the ICA incorrectly held that the

district court did not err when it found that HFI did not commit

a UDAP violation by retaining Buyers’ $1,000.00 deposit.11             The

district court, and subsequently the ICA, found that HFI was

entitled to retain Buyers’ deposit, in part, because the

purchase agreement contained a term which stated that “If I do

not accept delivery of the vehicle I purchased, [HFI] may keep

      11    The district court originally ruled in favor of Buyers on summary
judgment for Buyers’ third UDAP claim (that the clutch assembly was defective
at delivery and HFI was not entitled to retain the $1,000.00 deposit).
However, testimony was presented at trial on this point, and the district
court included in its FOF No. 28, that “Plaintiffs have failed to sustain
their burden of proof that the clutch was damaged or otherwise defective at
the time they took possession of the Vehicle[.]”

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my cash deposit as payment for [HFI’s] costs.”           HFI provided

evidence, including the testimony of Tabios and HFI’s Exhibit Q,

that established that it cost HFI $1,110.04 or 1,109.7512 to

replace the broken clutch assembly that, by HFI’s own evidence,

included the flywheel, clutch, pressure pad, and slave cylinder.

           Whether HFI could retain the $1,000.00 deposit depends

upon whether the clutch assembly was defective when Buyers took

possession of the Vehicle or whether Buyers caused the damage to

the clutch assembly in the forty-seven miles they had possession

of the Vehicle.     In answering this question, the ICA concluded

that the district court’s finding that “Buyers failed in their

burden of proving that the clutch was damaged or otherwise

defective when they took possession of the Vehicle” was not

“clearly erroneous” because HFI presented substantial evidence

that the “clutch was ‘burnt’” by Buyers after Buyers received

possession of the car.

           This finding was erroneous.        The evidence established

that the entire “clutch assembly” was replaced, not just the

clutch pressure pad, due in part to a leaky slave cylinder and a

burned flywheel.     Moreover, the evidence was uncontested that a

leaky hydraulic slave cylinder cannot be caused by use or misuse

      12    HFI’s version of the receipt has a handwritten price of
$1,109.75. Buyers’ version of what appears to be an internal version of the
same receipt lists the price as $1,110.04.

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for forty-seven miles.13      Evidence that the leaky hydraulic slave

cylinder cannot be caused by use or misuse for forty-seven

miles14 in conjunction with evidence that the “clutch assembly”

was damaged and needed to be replaced, established that the

clutch was damaged or defective when Buyers took possession of

the Vehicle.

            Both Buyers testified that Lindsey raised concerns

about the clutch during the test drive15 and that HFI told Buyers

not to worry, repeating that “it was a high-performance clutch”

and, therefore, felt different.16         Testimony from Buyers’ expert

witness Moniz suggested that the “soft” clutch that Lindsey

      13    Moniz testified that “40 miles additional mileage” on any vehicle
would “never, ever” cause the clutch assembly to wear out, “[s]omething must
have given way.” Likewise, Moniz testified that a failure in the slave
cylinder could not be caused by driving for “40 miles” and if it failed
during the “40 miles” Buyers drove it, “[i]t must have been coincidental,
because I don’t think you can drive a car for 40 miles and cause it to leak.
It had to have been on its way out.”

     14     Expert witness Tabios testified that the entire clutch assembly
needed to be replaced because the slave cylinder “had a seepage, so they
ended up replacing that. But the main problem on this was the clutch disc
was burnt.” Tabios also testified that he observed “burn marks on the clutch
disc and the fly wheel.” The invoice produced by HFI for the repair listed
the “description of cause” as “replace flywheel, clutch, and pressure plate;
replace clutch slave-leaking; bleed clutch system, top off fluid level.”
HFI’s invoice listed the part number, quantity, and list number for the “new
parts” that were installed during the repair, including the “flywheel[,]” a
“KIT - CL[,]” a “cylinder[,]” “cylinder ASY - clutch[,]” and “fluid -
brake[.]”

     15     Lindsey testified that “you had to feed it a – a lot of gas so it
wouldn’t stall out[.]”

      16    HFI salesperson Angel Mendias testified that the issues during
the test drive were not due to “something wrong with the clutch,” rather the
issue was “[t]he way [Lindsey] was shifting[.]”

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complained of during the test drive was the result of a leaky

gasket in the slave cylinder.        Thus, this record supports the

conclusion that the clutch assembly was damaged or defective

when Buyers took possession of the Vehicle and was not damaged

as a result of Buyers’ use or misuse.

            Lindsey’s presale concerns about the clutch are

evidenced not only by his and Leong’s testimony, but also by the

“Get Ready Authorization” containing handwritten notes in a box

titled “ADDITIONAL AGREEMENTS[.]”         The additional agreements

stated:   “sold as is [and] as equipped” with the circled phrase

“have service check clutch cust. states ‘soft’” and an “OK”

written next to the manager’s initials “HV[.]”           Accordingly, the

evidence demonstrates that Buyers raised concerns after test

driving the Vehicle about a “soft clutch”--consistent with a

leaky slave cylinder--prior to signing the second Vehicle

purchase agreement,17 and HFI represented that it would “check

[the] clutch” as an “additional agreement” to the sale.18

            The district court, and subsequently the ICA,

determined that HRS § 481J-2 did not cover the clutch assembly

     17     The handwritten note appears to have been written after the first
purchase agreement was signed but before the second purchase agreement was
signed.

      18    The ICA did not consider the evidence of the handwritten notation
on the Get Ready Authorization.

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and that Buyers had “failed in their burden of proving that the

clutch was damaged or otherwise defective when they took

possession of the Vehicle.”

           As discussed previously, HRS § 481J-2 explicitly

covers the flywheel, gaskets, seals, all lubricated parts,

internal parts, and torque converter.         The evidence in the

record--that the clutch assembly had to be replaced and that

damage requiring such replacement would “never, ever” be caused

by driving just forty-seven miles--supports the conclusion that

the clutch assembly, or at least the slave cylinder, was

defective at the time Buyers took delivery of the Vehicle.              Put

simply, the record does not contain evidence to support the

district court’s finding that Lindsey, who had life-long

experience driving manual transmission vehicles19 and had over

275,000 miles on the manual clutch of his Ford F-350, would burn

out the clutch assembly and cause a slave cylinder leak by

driving a high-performance racing vehicle for forty-seven miles.

Amfac, Inc. v. Waikiki Beachcomber Inv. Co., 74 Haw. 85, 116,

839 P.2d 10, 27-28 (1992) (holding that a “FOF is clearly

erroneous when, despite evidence to support the finding, the

appellate court is left with the definite and firm conviction in

reviewing the entire evidence that a mistake has been
      19    Lindsey testified that he been driving manual transmission
vehicles “[s]ince I was 15” and has only owned manual transmission vehicles.

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committed”).   Consequently, the district court’s finding that

the warranty for used cars in HRS § 481J-2 did not cover the

clutch assembly and that Buyers had “failed in their burden of

proving that the clutch was damaged or otherwise defective when

they took possession of the Vehicle” was clearly erroneous.

                             V.   CONCLUSION

          For the foregoing reasons, we affirm in part and

vacate in part the ICA’s March 12, 2020 Judgment on Appeal

affirming the district court’s March 24, 2015 Order on Motion

for Summary Judgment and August 25, 2015 Judgment.           The ICA

erred when it affirmed the district court regarding Buyers’

remaining UDAP claims.     Therefore, this case is remanded to the

district court for proceedings consistent with this summary

disposition order.     The ICA’s judgment on appeal is affirmed in

all other respects.

          DATED:     Honolulu, Hawaiʻi, December 10, 2021.

Charles S. Lotsof                        /s/ Mark E. Recktenwald
for petitioners
                                         /s/ Paula A. Nakayama
Benjamin M. Crepes,
Kevin W. Herring, and                    /s/ Sabrina S. McKenna
(Michael R. Vieira on
the briefs) for                          /s/ Michael D. Wilson
respondent
                                         /s/ Christine E. Kuriyama

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