Court Opinion

ID: 873953
Source: CourtListenerOpinion
Date Created: 2013-06-03 23:18:14.19573+00
Date Added: 2024-06-11T15:11:09.999047
License: Public Domain

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                                                               Electronically Filed
                                                               Supreme Court
                                                               SCWC-30337
                                                               03-JUN-2013
                                                               11:08 AM

            IN THE SUPREME COURT OF THE STATE OF HAWAI#I

                                 ---o0o---

          STATE OF HAWAI#I, Respondent/Plaintiff-Appellee,

                                     vs.

        TERRANCE E. ATWOOD, Petitioner/Defendant-Appellant.

                                SCWC-30337

          CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
                 (ICA NO. 30337; CR. NO. 07-1-0635)

                               JUNE 3, 2013

     NAKAYAMA, ACTING C.J., ACOBA, MCKENNA, AND POLLACK, JJ.,
AND CIRCUIT JUDGE SAKAMOTO, IN PLACE OF RECKTENWALD, C.J., RECUSED

           OPINION OF THE COURT BY NAKAYAMA, ACTING C.J.

           In this case involving an uncompleted home remodeling

contract, we hold that breach of the contract alone does not

suffice to establish probable cause to charge a defendant with

Theft in the First Degree by deception where the record does not

establish that the defendant did not intend to perform his part
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of the bargain nor otherwise deprive the complainant of property

exceeding $20,000 in value.

            In 2006, Petitioner/Defendant-Appellant Terrance E.

Atwood entered into a contract with complainant Jenwei Luu, M.D.

for the purpose of remodeling the bathrooms in Luu’s house.

Atwood represented to Luu that he was a licensed contractor when

he was in fact not; after Luu discovered that Atwood was

unlicensed, however, he decided to keep Atwood on the job because

of the time and money already invested.          Before the remodeling

was completed, Luu fired Atwood due to a dispute regarding the

purchasing of materials.       After an investigation by the Regulated

Industries Complaint Office (RICO) of the Department of Commerce

and Consumer Affairs (DCCA), the State presented its case to a

grand jury and obtained an indictment charging Atwood with one

count of Theft in the First Degree and one count of Unlicensed

Activity.

            Atwood moved to dismiss the theft charge, arguing that

the State’s evidence presented to the grand jury did not

demonstrate his intent not to perform his part of the contract

and thus failed to establish probable cause for the grand jury to

indict him for theft.      The Circuit Court of the Second Circuit1

denied the motion but permitted Atwood to file an interlocutory

     1
            The Honorable Richard T. Bissen, Jr. presided.

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appeal; the Intermediate Court of Appeals (ICA) affirmed the

circuit court’s denial of the motion.          The ICA concluded that

there was sufficient evidence for the grand jury to indict Atwood

for first-degree theft given his misrepresentation to Luu that he

was an unlicensed contractor, which thereby induced Luu to enter

into a contract and pay Atwood $95,930 before ultimately firing

him and hiring another contractor to finish the job.

            On certiorari, Atwood makes the same arguments to this

court in seeking dismissal of the theft charge.            Because we agree

with Atwood that the evidence in the record did not suffice to

establish probable cause that he committed theft of property

exceeding $20,000 in value, we conclude that the circuit court

erred in denying his motion to dismiss the charge of Theft in the

First Degree and that the ICA erred in affirming the circuit

court’s order denying the motion.          Accordingly, we vacate the

judgments of the circuit court and the ICA and remand this case

to the circuit court with instructions to dismiss Count One of

the indictment charging Atwood with Theft in the First Degree.

                               I.   BACKGROUND

A.    Grand Jury Proceedings

            On October 12, 2007, the State filed an indictment

returned by the Maui Grand Jury charging Atwood with one count of

Theft in the First Degree in violation of Hawai#i Revised

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Statutes (HRS) § 708-830.5(1)(a)2 and one count of Unlicensed

Activity in violation of HRS § 436B-27(b).3

            According to testimony given before the grand jury on

      2
            HRS § 708-830.5 (Supp. 2006) provided then, as it does now, in
pertinent part:

            Theft in the first degree. (1) A person commits the offense
            of theft in the first degree if the person commits theft:

            (a) Of property or services, the value of which exceeds
            $20,000[.]

            . . .

                    (2) Theft in the first degree is a class B felony.

            Further, HRS § 708-830 (Supp. 2006) provided then, as it does now,
in pertinent part:

            Theft. A person commits theft if the person does any of the
            following:

            . . .

            (2) Property obtained or control exerted through deception.
            A person obtains, or exerts control over, the property of
            another by deception with intent to deprive the other of the
            property.

Definition and discussion of the terms “deception” and “deprive” appear infra.
      3
            HRS § 436B-27 (Supp. 2006) provided then, as it does now, in
pertinent part:

            Civil and criminal sanctions for unlicensed activity; fines;
            injunctive relief; damages; forfeiture.

            . . .

            (b) Any person, who engages in an activity requiring a
            license issued by the licensing authority and who fails to
            obtain the required license, or who uses any word, title, or
            representation to induce the false belief that the person is
            licensed to engage in the activity, other than a
            circumstance of first instance involving the inadvertent
            failure to renew a previously existing license, shall be
            guilty of a misdemeanor and be subject to a fine of not more
            than $1,000 or imprisoned not more than one year, or both,
            and each day’s violation shall be deemed a separate offense.

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October 12, 2007 and the findings of fact entered on December 16,

2009, Luu hired Atwood as a contractor to remodel the bathrooms

in his home in Kihei.      Atwood had been referred to Luu by one of

Luu’s friends and presented himself as a licensed contractor;

Atwood also showed Luu two job sites representing his work, but

Luu later learned that one of the sites was not Atwood’s.              On May

14, 2006, Luu and Atwood signed a contract that had been drafted

by Atwood at the agreed price of $89,394, and Atwood thereafter

began the remodeling work.

            Due to concerns about delays and work quality, Luu

contacted DCCA on January 26, 2007; DCCA informed Luu that Atwood

was not a licensed contractor and furthermore that the license

number Atwood gave Luu belonged to a contractor on the island of

Hawai#i.   Nevertheless, Luu explained that he kept Atwood on the

job because
            by that time we had already paid him that $95,000[4]. We
            were just too far into it. He kept assuring us that he
            would finish. We at that time had already started looking
            into our options, talking to lawyers on what we can do to
            get him to finish. And all of the lawyers we talked to have
            told us that we were basically at his mercy, we have to wait
            for him to finish. So that’s why we had to continue.

On February 26, 2007, Luu had Atwood meet him at the plumbing

store where Atwood was supposed to have ordered certain plumbing

materials.    Luu reviewed several items with Atwood that Atwood

      4
            Although the contract price was $89,394, Luu had paid Atwood a
total of $95,930, including cost overruns, as of the time Atwood was fired.

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had not purchased although Luu had already paid him to do so;

because Atwood refused to buy the materials at that meeting at

Luu’s request, Luu fired Atwood that day and hired another

contractor to finish the job at an additional cost of at least

$38,000.

            The grand jury also heard the testimony of Robert

Hottenstein, the supervising investigator for DCCA’s Maui RICO

office.    Hottenstein testified that Atwood had never held a valid

contractor’s license in Hawai#i and that the license number

Atwood provided to Luu actually belonged to someone else who said

he did not know Atwood, had never met Atwood, and had not given

Atwood permission to use his license.          Hottenstein also stated

that for the purpose of determining how much money Atwood

received from Luu, Luu submitted twenty-two cancelled checks

totaling approximately $78,000.         Hottenstein further stated that

he sent a letter to Atwood asking a series of questions; Atwood

submitted a written response establishing that the value of his

work was over $1,000, the threshold for which state law requires

a contractor’s license.

B.    Motion to Dismiss Count One

            On October 28, 2009, Atwood filed a motion to dismiss

Count One of the indictment, the charge of Theft in the First

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Degree, for lack of probable cause and as a de minimis offense.5

In an extensive memorandum in support of the motion, Atwood

stressed that nonperformance of the remodeling contract in this

case could only give rise to a civil breach-of-contract action

between Atwood and Luu and could not establish criminal liability

for the offense of theft by deception.          In that regard, Atwood

noted that criminal liability for theft can attach when an actor

receives something of value in return for a contractual promise

but has no intention of fulfilling his or her part of the

contract.    Accordingly, absent the actor’s specific intent not to

fulfill the contract, nonperformance or midperformance breach of

the contract alone cannot result in any criminal liability.

Atwood thus argued that the grand jury lacked probable cause to

return an indictment in Count One because it was not presented

with evidence sufficient to establish that Atwood entered into a

contract with Luu with an intention not to fulfill his

obligations to Luu under that contract.

            The State argued in opposition that the definition of

“deception” in HRS § 708-8006 is met not only when a defendant

      5
            Although Atwood argued de minimis as an alternate ground for
dismissal, he did not preserve that argument in the ICA or in this court;
consequently, it is not discussed.
      6
            HRS § 708-800 (1993) provides, in pertinent part:

            “Deception” occurs when a person knowingly:
                                                                (continued...)

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intends not to perform a promise, but also when the defendant

“[c]reates or confirms another’s impression which is false and

which the defendant does not believe to be true” or “[f]ails to

correct a false impression which the person previously has

created or confirmed[.]”       (Quoting HRS § 708-800).       The State

further argued that “Doctor Luu’s reliance on [Atwood]’s

representation that he was a licensed contractor was a matter of

pecuniary significance[]” and therefore that Atwood did not fall

within the exception delineating that “deception” “does not . . .

include falsity as to matters having no pecuniary

      6
       (...continued)
            (1) Creates or confirms another’s impression which is false
            and which the defendant does not believe to be true;

            (2) Fails to correct a false impression which the person
            previously has created or confirmed;

            (3) Prevents another from acquiring information pertinent to
            the disposition of the property involved;

            (4) Sells or otherwise transfers or encumbers property,
            failing to disclose a lien, adverse claim, or other legal
            impediment to the enjoyment of the property, whether that
            impediment is or is not valid, or is or is not a matter of
            official record; or

            (5) Promises performance which the person does not intend to
            perform or knows will not be performed, but a person’s
            intention not to perform a promise shall not be inferred
            from the fact alone that the person did not subsequently
            perform the promise.

            The term “deception” does not, however, include falsity as
            to matters having no pecuniary significance, or puffing by
            statements unlikely to deceive ordinary persons in the group
            addressed. “Puffing” means an exaggerated commendation of
            wares or services in communications addressed to the public
            or to a class or group.

(Emphasis added).

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significance[.]”    (Quoting HRS § 708-800).

          In response, Atwood disputed the State’s contention

that he had “created a false impression of a matter of pecuniary

significance.”    He reiterated his contention that theft by

deception is only applicable to contract disputes where the

defendant had no intention of performing the promised contractual

obligations at the time of formation of the contract, and

therefore that “[a]ny misrepresentations not accompanied by the

specific intent not to perform the contract do not implicate

criminal law.”

          The circuit court held a hearing on Atwood’s motion to

dismiss on December 2, 2009 and denied the motion after argument

from both parties.    The court then filed its Findings of Fact,

Conclusions of Law, and Order Denying Defendant’s Motion to

Dismiss Count One on December 16, 2009, entering the following

relevant conclusions of law:
                3. “Deception” occurs when a person knowingly: (1)
          creates or confirms another’s impression which is false and
          which the defendant does not believe to be true; or (2)
          fails to correct a false impression which he previously has
          created or confirmed. The term “deception” does not include
          falsity as to matters having no pecuniary significance.
          Section 708-800, H.R.S.
                4. A contract is an agreement between two or more
          persons which creates an obligation to do or not do
          something. A contract may be oral or written. A contract
          requires proof of all of the following elements: persons
          with capacity and authority to enter into the contract; and
          an offer; and an acceptance of that offer producing a mutual
          agreement, or a meeting of the minds, between the persons as
          to all the essential elements of the agreement at the time
          the offer was accepted; and consideration. Hawaii Civil

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          Jury Instructions, Number 15.1, 1999 Edition [including
          Instructions Received through January 1, 2009].
                5. Fraudulent inducement to enter a contract is shown
          when: (1) there was representation of a material fact; and
          (2) the representation was false when it was made; and (3)
          the party making the representation either knew that it was
          false when it was made or was reckless in making the
          representation without knowing that it was true or false;
          and (4) that the party intended that the other party relied
          upon the representation; and (5) that the party relied upon
          the representation by entering into the contract; and (6)
          the reliance upon the representation was reasonable. Hawaii
          Civil Jury Instructions, Number 15.27.
                6. The [c]ourt finds that there is sufficient
          probable cause to support the charge in Count One, Theft in
          the First Degree, by deception, in violation of Section 708-
          830.5, H.R.S. The [c]ourt finds that Dr. Luu did not enter
          into a valid contract with [Atwood]. [Atwood] deceived or
          fraudulently induced Dr. Luu to enter into the agreement of
          May 14, 2006, because [Atwood]: (1) fraudulently represented
          that he was a licensed contractor; (2) gave a license number
          that belonged to another individual on the Big Island; and
          (3) showed off remodeling projects at other locations that
          were not his projects, in essence, passing off the work of
          others as his own work.
                7. The [c]ourt further finds that there is sufficient
          evidence before the Grand Jury that Doctor Luu’s reliance on
          [Atwood]’s representation that [Atwood] was a licensed
          contractor was a matter of pecuniary significance, and that
          but for [Atwood]’s representation, Dr. Luu would not have
          entered into the contract and paid [Atwood] any money. The
          [c]ourt notes that Dr. Luu’s reliance on [Atwood]’s
          representation that he was a licensed contractor was
          reasonable. Parties who contract with licensed contractors,
          as opposed to unlicenced [sic] builders, are entitled to
          some relief when there is injury by any act, representation,
          transaction, or conduct of a duly licensed contractor. [See,
          e.g., Section 444-26 H.R.S. which established a Contractors
          [sic] recovery fund; Graham Construction Supply, Inc. v.
          Schraeder Construction, Inc., 63 Haw. 540, 632 P.2d 649,
          (1981); Educators Ventures, Inc. v. Bundy, 3 Haw. App. 435,
          652 P.2d 637. (1982); Kuhnert v. Allison, 76 Haw. 39, 868
          P.2d 457, (1994)].

(Some brackets in original and some added).          On January 5, 2010,

Atwood filed an application for interlocutory appeal from the

order denying his motion to dismiss Count One; the circuit court

granted the application on January 26, 2010.          Atwood timely filed

his notice of appeal on February 12, 2010 pursuant to the circuit

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court’s extension of time to file such notice to February 14,

2010.

C.    The ICA’s May 17, 2012 Summary Disposition Order

            On interlocutory appeal to the ICA, Atwood’s sole point

of error was that the circuit court erred by denying his motion

to dismiss the charge of Theft in the First Degree in Count One

of the indictment.      As he did in the circuit court, Atwood

contended that the evidence presented by the State to the grand

jury did not suffice to establish that Atwood did not intend to

fulfill his contractual obligations to Luu when they made their

contract, or at anytime thereafter; consequently, there was no

evidence to support the State’s position that Atwood had

committed theft by deception simply by accepting Luu’s money.

Atwood stressed that at most, “rather than theft by deception,

the evidence before the grand jury showed the possible existence

of a civil contract dispute.”

            The State argued in opposition that the grand jury had

sufficient facts to support its finding of probable cause; thus,

Atwood was properly charged with Theft in the First Degree under

a theory of theft by deception.         The State added that a defendant

may be charged with theft by deception even in situations where

civil contractual obligations are involved, citing State v.

Gaylord, 78 Hawai#i 127, 890 P.2d 1167 (1995), and State v.

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Borochov, 86 Hawai#i 183, 948 P.2d 604 (App. 1997).           In the

present case, the State argued that the grand jury was presented

with sufficient evidence to show that Atwood had misrepresented

his license status, and that in doing so he was able to enter

into the contract with Luu; therefore, “Atwood acted willfully

and by deception to induce the contract and obtain payment

thereunder.”   (Citing State v. Souza, 119 Hawai#i 60, 73, 193

P.3d 1260, 1273 (App. 2008)).

          The ICA affirmed the circuit court’s December 16, 2009

order denying Atwood’s motion to dismiss Count One.           State v.

Atwood, No. 30337, 127 Hawai#i 241, 277 P.3d 335, 2012 WL

1764084, at *4 (App. May 17, 2012) (SDO).         The ICA concluded that

probable cause existed to indict Atwood for Theft in the First

Degree because Atwood misrepresented that he was a licensed

contractor and Luu relied on this misrepresentation, entered into

a remodeling contract with Atwood, and paid Atwood $95,930 before

ultimately terminating him.      Id. at *2.     Relying on the

definition of “deception” found in HRS § 708-800, the ICA noted

that “Atwood knowingly created an impression that he was a

licensed contractor by stating that he was a licensed

contractor.”   Id.   Based on this misrepresentation, Luu entered

into a contract that he otherwise would not have and gave Atwood

a total of $95,930.     Id.   Accordingly, the ICA concluded that

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this constituted sufficient evidence to support the indictment.

Id.

             In response to Atwood’s argument that “there was no

proof that he did not intend to perform the contract when it was

made[,]” the ICA agreed with the State and noted that Atwood’s

argument “ignore[d] sections 1 and 2 of the definition of

deception which prohibits creating or confirming an impression

which is false.”       Id. at *3.    Although a contract may have

existed between Atwood and Luu, the ICA noted that the existence

of a contract did “not foreclose criminal liability for other

means of deception as specified by HRS § 708-800.”              Id.

Accordingly, in the ICA’s view, “evidence that Atwood did not

intend to perform the contract at the time it was made [wa]s not

required to indict Atwood for Theft in the First Degree under the

theory asserted by the prosecution.”           Id.

             The ICA also rejected Atwood’s argument that the

provisions of HRS chapters 436B and 444 were sufficient to

regulate contractors and that the penalties provided in those

chapters are distinct from the crimes enumerated in the Hawai#i

Penal Code.      Id.   Rather, the ICA pointed to an Ohio case holding

that the statute barring a person from holding oneself out as an

attorney without having been licensed did not preclude

prosecution of that person for theft by deception.              Id. (citing

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State v. Brown, 671 N.E.2d 280, 282 (Ohio App. 1995)).              Thus, in

the present case, the fact that Atwood falsely held himself out

as a licensed contractor did not prohibit simultaneous

prosecution for theft; as the ICA also noted, theft by deception

“requires obtaining or exerting control over property of another

by deception, something that is not required to establish a

violation of HRS [c]hapters 436B or 444.”           Id. at *4.

            The ICA entered judgment on June 25, 2012.            Atwood

timely filed his application on August 24, 2012, and the State

timely filed a response to the application on September 10, 2012.

                          II.    STANDARD OF REVIEW

A.    Sufficiency of Evidence to Support Grand Jury Indictment

            “A grand jury indictment must be based on probable cause.”
            State v. Okumura, 59 Haw. 549, 550, 584 P.2d 117, 119
            (1978). Probable cause is established by “a state of facts
            as would lead a person of ordinary caution or prudence to
            believe and conscientiously entertain a strong suspicion of
            the guilt of the accused.” State v. Chung, 75 Haw. 398,
            409-10, 862 P.2d 1063, 1070 (1993). “The evidence to
            support an indictment need not be sufficient to support a
            conviction.” State v. Ganal, 81 Hawai#i 358, 367, 917 P.2d
            370, 379 (1996). “In reviewing the sufficiency of the
            evidence to establish probable cause before the grand jury,
            ‘every legitimate inference that may be drawn from the
            evidence must be drawn in favor of the indictment and
            neither the trial court nor the appellate court on review
            may substitute its judgment as to the weight of the evidence
            for [that of] the Grand Jury.’” Id. (quoting State v. Kuba,
            68 Haw. 184, 191, 706 P.2d 1305, 1310-11 (1985)).

State v. Ontai, 84 Hawai#i 56, 63, 929 P.2d 69, 76 (1996).

                                III.   DISCUSSION

            As he did to the circuit court in support of his motion

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to dismiss and to the ICA on appeal from denial of that motion,

Atwood argues to this court that there is no evidence in the

record that he intended to deprive Luu of the value of any

property by accepting Luu’s money without fulfilling his part of

the remodeling contract.      Accordingly, Atwood maintains that the

State did not establish probable cause to enable the grand jury

to return an indictment, at least with respect to Count One

charging him with Theft in the First Degree.

          In response, the State essentially argues that the ICA

properly affirmed the circuit court’s order because there was

sufficient evidence before the grand jury to find probable cause

for a charge of Theft in the First Degree.         In fact, the State

argues that “[Atwood] does not appear to contest that there was

sufficient evidence of probable cause presented to the grand jury

for all of the elements of Theft in the First Degree, except for

the intent to deprive element.”       (Emphasis in original).       With

respect to the intent to deprive7 element, the State submits that

     7
          HRS § 708-800 (1993) provides, in pertinent part:

          “Deprive” means:

          (1) To withhold property or cause it to be withheld from a
          person permanently or for so extended a period or under such
          circumstances that a significant portion of its economic
          value, or of the use and benefit thereof, is lost to the
          person; or

          (2) To dispose of the property so as to make it unlikely
          that the owner will recover it; or
                                                              (continued...)

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“there was evidence of [Atwood]’s intent to deprive both at the

formation and performance stages of the contract.”           (Emphasis in

original).    At the time of contract formation, Atwood had falsely

represented to Luu that he was a licensed contractor and that he

had completed other projects on Maui; as a result of hiring

Atwood based on these misrepresentations, Luu paid Atwood a total

of $95,930.   Further, evidence was presented that during the

performance of the contract, Atwood did not buy certain supplies

needed for the job and even asked Luu for additional money to buy

supplies that should have already been purchased.           The State thus

concludes that “in drawing every legitimate inference from the

evidence before the grand jury in favor of the indictment, there

was a state of facts that would lead a person of ordinary caution

or prudence to believe and conscientiously entertain a strong

suspicion of guilt of [Atwood] for the offense of Theft in the

First Degree.”

           We agree with Atwood that where a defendant is charged

with theft by deception in a situation involving a contract, the

     7
      (...continued)
           (3) To retain the property with intent to restore it to the
           owner only if the owner purchases or leases it back, or pays
           a reward or other compensation for its return; or

           (4) To sell, give, pledge, or otherwise transfer any
           interest in the property; or

           (5) To subject the property to a claim of a person other
           than the owner.

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intent element of the crime is not met where evidence shows that

the defendant performed, or intended to perform, his or her part

of the contract; conversely, the intent element is satisfied only

when the defendant intends not to perform his or her contractual

obligations.    Subsequent breach of the contract may give rise to

potential civil remedies grounded in contract law, but unless

accompanied by the intent to deprive the complainant of the value

of his or her property, such breach does not create criminal

liability for theft.     We further conclude that, based on Atwood’s

performance of his part of the contract and the failure of the

State to produce evidence of the value of the work completed by

Atwood, the State failed to establish that Atwood deprived Luu of

property exceeding $20,000 in value, the threshold for first-

degree theft.    Accordingly, we conclude that the circuit court

erred in not dismissing Count One of the indictment.

A.   The circuit court erred in denying Atwood’s motion to
dismiss because there was no evidence to show that Atwood
intended to deprive Luu of the value of any property

          The main thrust of Atwood’s argument has consistently

been that in order to establish probable cause for a charge of

theft by deception, the State must present evidence that Atwood

entered into a contract with Luu and intended to deprive Luu of

the value of Luu’s property by accepting payment without

performing his part of the contract.        The commentary to the theft

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statutes in the Hawai#i Penal Code reflects this general

statement of the law: “With respect to contractual obligations, a

present intent not to perform would constitute deception,

although mere breach at some future time, without such present

intent, would not.”      HRS § 708-833 cmt. (1993).8

            We also find support for Atwood’s position in several

of the cases he has cited.       In Smith v. State, for example, Smith

contracted with the complainant to screenprint T-shirts and

accepted complainant’s money, but was ultimately unable to

produce the shirts despite making some efforts.           665 So. 2d 1002,

1003 (Ala. Crim. App. 1995).        On appeal, the Alabama Court of

Criminal Appeals reversed Smith’s theft conviction, concluding

that “[Smith] correctly allege[d] that the State failed to prove

the element of intent to deprive the owner of her property as

      8
            Although Atwood argues, and many cases and treatises confirm, that
the defendant’s intent to deprive must exist at the time of formation of the
contract between the defendant and the complainant, we also note that the
intent to deprive may also be formed subsequent to contract formation. See,
e.g., Ehrhardt v. State, 334 S.W.3d 849, 856 (Tex. App. 2011) (“The requisite
criminal intent can be formed after the formation of a contract.”);
Higginbotham v. State, 356 S.W.2d 584, 588 (Tex. App. 2011) (citing Ehrhardt,
334 S.W.3d at 856) (footnote omitted) (“Although there was no evidence
presented that Higginbotham possessed the requisite criminal intent at the
time the contract was formed, this [c]ourt has held that the requisite intent
can be formed after the formation of a contract.”); State v. Frost, 99 So. 3d
1075, 1080-81 (La. App. 2012) (noting that “a defendant can form an intent to
steal after taking possession of property through honest means” and “the
timing of a defendant’s intent to deprive permanently is inconsequential, and
the inquiry into that intent should focus only on whether such an intent was
actually formed”). Regardless of when the defendant forms the intent to
deprive, however, “the deprivation of property cannot occur prior to the
formation of the requisite intent.” Higginbotham, 356 S.W.3d at 588 (citing
Ehrhardt, 334 S.W.3d at 856; Cortez v. State, 582 S.W.2d 119, 120-21 (Tex.
Crim. App. 1979)).

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alleged in the indictment.”      Id. at 1002 (citing Ala. Code § 13A-

8-2(1) (1975)).    As relevant to this discussion, the court also

noted that Smith “failed to perform a contractual obligation he

had with the victim, and as such, his actions constitute, if

anything, a breach of contract, which merits a civil remedy.”

Id. at 1004 (emphasis added).

          In Commonwealth v. Layaou, the Pennsylvania Superior

Court reversed Layaou’s conviction for theft by deception in a

home remodeling case after he began but then failed to complete

the job, forcing complainants to hire another contractor at

additional cost.    405 A.2d 500, 501 (Pa. Super. 1979).          The court

noted that the initial expenditure of money and manpower “d[id]

not support a finding that [Layaou] never intended to perform; if

anything, it more strongly support[ed] a finding that [Layaou]

intended to perform originally but for some reason later

abandoned the job.”     Id.   The Layaou court also noted that “[t]he

[complainants’] claims against him are more appropriately

resolved in a civil action.”      Id. at 502.     The same court

reversed another conviction for theft by deception based on an

unfinished home remodeling contract where the defendant began but

did not return to finish the job.        See Commonwealth v. Bentley,

448 A.2d 628 (Pa. Super. 1982).       There, the court held that “the

record fail[ed] to show any evidence as to appellant’s intent

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except his failure to perform.       This alone is insufficient.”           Id.

at 631.

            In a relatively recent case from South Dakota, Kent

Jackson was found guilty of grand theft by deception after

failing to complete a commercial roof installation for a variety

of reasons.    State v. Jackson, 765 N.W.2d 541, 542-44 (S.D.

2009).    In reversing Jackson’s conviction, the South Dakota

Supreme Court concluded that his failure to perform resulted from

conduct and happenstance occurring subsequent to formation of the

roofing contract: “The State provided no evidence indicating

that, at the time Jackson received the down payment from [the

complainant], Jackson had the intent to deceive him of his

property. . . . Jackson’s misfortune of bad luck, unavoidable

delays, and perhaps not the ideal characteristics of a

businessman do not equate to a specific intent to deprive [the

complainant] of his money.”      Id. at 547-48 (emphasis added).

            Finally, in a recently decided case, the Maryland Court

of Appeals affirmed the judgment of the Maryland Special Court of

Appeals reversing Leon Coleman’s conviction on eight counts of

theft by deception.     State v. Coleman, 33 A.3d 468 (Md. 2011),

aff’g 11 A.3d 326 (Md. App. 2010).        In that case, prospective

homebuyers paid Coleman to purchase unimproved lots in a

subdivision and then construct houses on those lots; the project

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failed because Coleman could not obtain required permits and ran

out of the homebuyers’ money before any houses could be

constructed.    Id. at 470-71.    In affirming the reversal of

Coleman’s conviction, the court noted that Coleman “gave value,

i.e. conveyed the lots, for the money he received in the way of

advances to pay for the lots, as provided under the contracts[,]”

and that Coleman had been working to draft floor plans and obtain

necessary building permits.      Id. at 474.     Thus, “Coleman’s

actions between the time of contract and the arrest manifested

his intent to perform[,]” and “[t]here was insufficient evidence

of intentional deprivation to support Coleman’s theft

convictions[.]”    Id. at 474, 478.

          As in the cited cases, we agree with Atwood that

probable cause did not exist to charge him with theft by

deception because the State did not present any evidence to the

grand jury to show that Atwood entered into a contract with Luu

intending to obtain Luu’s money without performing his part of

the contract.    Cf. HRS § 708-833 cmt. (“It should be noted that

in all theft offenses, the requisite mental state is intent to

deprive the owner of the value of property or services.”).             On

the contrary, the evidence available to us shows that Atwood

expended substantial time and effort on the project between May

2006 and February 2007.     While some of the evidence suggested

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that Atwood’s work was not of the best quality, Atwood

substantially performed what he promised to do according to the

contract; any shortcomings in his work product are a matter of

civil, not criminal, law.       Further, Atwood did not fully complete

the job because Luu fired him due to a contractual dispute over

the purchase of materials; the firing did not appear to implicate

other potential factors such as the quality of Atwood’s work or

his status as an unlicensed contractor.          Moreover, Atwood did not

prematurely abandon the job or disappear without a means to be

contacted, as the defendants did in the cases we have cited from

other jurisdictions.9

            Because Atwood may have induced Luu to enter the

contract by representing himself as a licensed contractor when in

fact he has never been so licensed in this state, the State

maintains that Atwood therefore obtained Luu’s money by deception

as that term is defined in HRS § 708-800; ultimately, however, we

reach the same result that probable cause did not exist to

support the theft charge.       Atwood notes that any

misrepresentation on which a theft charge is based must be

accompanied by the intent to deceive.         He therefore relies on the

      9
            Again, we note that, despite their abandonment of or inability to
complete their respective projects, the defendants in the cited cases all had
their convictions reversed because there was ultimately no evidence that they
possessed the intent not to perform their contractual obligations, and in many
cases there was in fact evidence of substantial performance.

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case law addressing theft by deception, only some of which we

have cited above, as well as definition (5) of “deception” in HRS

§ 708-800, which provides that deception “occurs when a person

knowingly . . . [p]romises performance which the person does not

intend to perform or knows will not be performed, but a person’s

intention not to perform a promise shall not be inferred from the

fact alone that the person did not subsequently perform the

promise.”

            In contrast, the State has relied on definition (1),

which provides that deception occurs when a person knowingly

“[c]reates or confirms another’s impression which is false and

which the defendant does not believe to be true[,]” and

definition (2), which provides that deception occurs when a

person knowingly “[f]ails to correct a false impression which the

person previously has created or confirmed[.]”          (Quoting HRS §

708-800).    Therefore, according to the State’s theory of the

case, which the ICA adopted in its SDO,
            Atwood knowingly created an impression that he was a
            licensed contractor by stating that he was a licensed
            contractor. Based on Atwood’s misrepresentation of being a
            licensed contractor, Luu agreed to hire Atwood. Luu then
            gave Atwood money totaling $95,930.00. There was sufficient
            evidence to indict Atwood for theft in the first degree.

Atwood, 2012 WL 1764084, at *2.        Respectfully, we disagree with

the State’s position because, as Atwood notes, any

misrepresentation on which a theft charge is based must be

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accompanied by the intent to deceive.        Atwood thus maintains that

the State has incorrectly conflated these two requirements by

arguing that Atwood induced Luu into entering the contract by

misrepresenting himself to be a licensed contractor, and

therefore under definitions (1) and (2) of “deception,” any money

paid to Atwood under the contract would support the theft by

deception charge.    Taken to its logical end, though, the State’s

position would require us to conclude that had Luu paid Atwood

the total cost of the remodeling work, and had Atwood been

allowed to complete the job, Atwood would nevertheless have

committed theft by deception at the same time he completed

performance of the contract, simply because of his initial

misrepresentation that he was licensed.         We do not agree that a

defendant can be charged with theft in such a situation.            Rather,

we agree with Atwood’s position that there must be evidence

showing that he intended to deprive Luu of Luu’s property

notwithstanding the misrepresentation concerning his status as a

licensed contractor.     See Evans v. State, 508 So. 2d 1205, 1208

(Ala. Crim. App. 1987) (citing Ala. Code § 13A-8-2(2) (1975))

(“Yet, deception, unaccompanied by an intent to deprive the owner

of its property, is not theft.”).

          Thus, while the State presented evidence that Luu hired

Atwood based on his ultimately false representations concerning

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his license status and his prior work product, there was no

evidence presented to indicate that Atwood intended to deprive

Luu of the value of any property.        Rather, the State’s evidence

actually showed that Atwood performed his part of the contract

until he was no longer permitted to do so by virtue of being

fired by Luu.   Accordingly, the State’s evidence did not suffice

to establish probable cause for the grand jury to return an

indictment charging Atwood with Theft in the First Degree by

deception.

B.   The circuit court also erred in denying Atwood’s motion to
dismiss because the State did not establish that Atwood satisfied
the threshold for Theft in the First Degree by depriving Luu of
property exceeding $20,000 in value

          We also note that the State specifically sought an

indictment from the grand jury charging Atwood with committing

one count of Theft in the First Degree.         Under HRS § 708-

830.5(1)(a), “[a] person commits the offense of theft in the

first degree if the person commits theft . . . [o]f property or

services, the value of which exceeds $20,000[.]”           However, the

evidence presented to the grand jury did not actually establish

the value of the property allegedly wrongfully obtained by

Atwood; consequently, Count One of the indictment should have

been dismissed because the State did not meet its burden of

establishing probable cause that Atwood committed theft of over

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$20,000 from Luu.

          Pursuant to their contract, Luu paid money to Atwood

over a period of several months and received the benefit of

Atwood’s remodeling work in return.        However, the record does not

indicate a specific dollar amount for the value of the remodeling

services actually performed by Atwood between May 2006 and

February 2007.

          In the State’s view, because Luu would not have hired

Atwood had he known Atwood’s representations were false, any

money that Luu subsequently paid to Atwood pursuant to the

contract was obtained by deception and would therefore count

toward the $20,000 threshold for charging Atwood with Theft in

the First Degree.    Accordingly, Atwood would have met that

threshold amount whether the $89,394 contract price, the $95,390

total price with overruns, or the $78,000 amount representing the

cancelled checks Luu submitted to DCCA was used.

          While these figures all far exceed the $20,000

threshold for charging Atwood with Theft in the First Degree, the

State’s evidence to the grand jury did not show what exact amount

of the total sum Luu paid to Atwood qualified as a deprivation of

Luu’s property as opposed to simply being payment for services

actually rendered.    The State also did not present any evidence

showing that Atwood otherwise deprived Luu of the value of Luu’s

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property by, for example, spending the money on himself or on

items not related to the remodeling.

          As another alternative, the State argued that the

$20,000 threshold was met because Luu subsequently paid $38,000

to a replacement contractor to complete the construction after he

fired Atwood.   However, because there is no evidence of the value

of the work that was done by Atwood, the amount paid to the

replacement contractor is immaterial and cannot support the

conclusion that Atwood intended to deprive Luu of the value of

that specific amount of money; accordingly, we cannot agree with

the State’s argument.

          As we recently stated:
          [I]n order for the grand jury to have found probable
          cause to support Taylor’s indictment for first degree
          theft, the State must have produced evidence of each
          essential element of the offense. See Ontai, 84
          Hawai#i at 64, 929 P.2d at 77. This court has held
          that there are three material elements for theft in
          the first degree under HRS §§ 708-830(1) and 708-
          830.5(1)(a): that “the defendant intended to: (2)
          deprive the other of his or her property; and (3)
          deprive another of property that exceeds $20,000 in
          value.” State v. Duncan, 101 Hawai#i 269, 279, 67
          P.3d 768, 778 (2003).

State v. Taylor, 126 Hawai#i 205, 218, 269 P.3d 740, 753 (2011).

In this case, although the State posited several different

amounts of money paid to Atwood that it argues would have

satisfied the $20,000 threshold for first-degree theft, all of

those amounts reflected payments made by Luu to Atwood in

exchange for the remodeling work that was actually completed

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between May 2006 and February 2007.        Because there was no showing

that any of the money paid to Atwood was not in exchange for the

remodeling work that Atwood actually performed, the State

therefore did not provide the grand jury with any specific amount

of property of which Luu was allegedly unlawfully deprived.

          Accordingly, the State did not present evidence

sufficient to establish probable cause that Atwood committed the

offense of Theft in the First Degree, and the circuit court

should have therefore dismissed Count One of the indictment.

                            IV.   CONCLUSION

          Based on the foregoing, we vacate the ICA’s June 25,

2012 Judgment on Appeal and the circuit court’s December 16, 2009

Findings of Fact, Conclusions of Law, and Order Denying

Defendant’s Motion to Dismiss Count One, and we remand this case

to the circuit court with instructions to dismiss Count One of

the indictment.

David A. Sereno,                         /s/ Paula A. Nakayama
for petitioner/defendant-
appellant                                /s/ Simeon R. Acoba, Jr.

Peter A. Hanano,                         /s/ Sabrina S. McKenna
for respondent/plaintiff-                /s/ Richard W. Pollack
appellee
                                         /s/ Karl K. Sakamoto

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