After considering all of the evidence submitted with respect to relevance, weight and probative value, and having objectively assessed the credibility of all witnesses who testified, the Court makes the following findings of facts. To the extent that any finding of fact may also be deemed a conclusion of law, it shall also be considered a conclusion of law.
1. Plaintiffs Dennis Hashimoto ("Mr. Hashimoto") and Jessica Hashimoto ("Mrs. Hashimoto") (collectively, "the Hashimotos") own the property located at 1005 Hoa Street, Honolulu, Hawaii. (J. Hashimoto Decl. ¶ 2; D. Hashimoto Decl. ¶ 2.)
2. The Hashimotos are not inexperienced in construction, as they helped design the custom-built home in which they currently reside (04/04/15 Tr. at 55:8-23), and because Mr. Hashimoto works in a related field as a surveyor. (05/04/15 Tr. at 24:19-21, 55:8-23.)
3. Mrs. Hashimoto demonstrated by her testimony that she is knowledgeable about construction. (05/04/15 Tr. at 101:13-102:24, 146:20-147:7; 05/05/15 Tr. at 24:3-12, 37:1-12; 05/06/15 Tr. at 33:20-34:6, 35:17-37:6.)
4. Keith C. Cockett ("Mr. Cockett") is an architect who has been licensed in California since 1995 and in Hawaii since 1996. (05/05/15 Tr. at 96:9-20.)
5. mr. Cockett is the President of Keith Cockett & Associates, Inc. ("KCA"). (Cockett Decl. ¶ 6.)
6. KCA is a corporation from which Mr. Cockett receives an annual K-1. (Cockett Decl. ¶ 6.)
7. KCA has always maintained its own bank account and is currently active and in good standing with the State of Hawaii. (Cockett Decl. ¶ 6; Exhibit 2003.)
8. Mr. Cockett had a good working relationship with the Hashimotos for a number of years, as Mr. Hashimoto did survey work on KCA's projects. (05/04/15 Tr. at 14:7-20, 44:10-22, 138:2-3; 05/05/15 Tr. at 153:13-154:8.)
9. David Evans ("Mr. Evans") was licensed as a general contractor from December 22, 2006 to September 30, 2012. (Evans Decl. ¶ 2.)
10. Mr. Evans was the Manager of Evans Construction LLC. (Evans Decl. ¶ 3.)
11. The Hashimotos sought the services of KCA to prepare the architectural plans for their new home because they had a positive impression of Mr. Cockett and KCA's projects. (05/04/15 Tr. at 14:7-15, 44:10-22.)
12. On November 12, 2004, Mr. Cockett provided a letter and proposal for services, to Jessica Hashimoto, for overall planning, development and building of a new single family dwelling at 1005 Hoa Street, Honolulu, HI 96825. (Cockett Decl. ¶ 8; Exhibit 2004.)
13. The proposal set forth the scope of work and services being proposed by KCA in connection with the design of the Hashimotos new home. (Cockett Decl. ¶ 8; Exhibit 2004.)
14. The proposal provided that KCA's services would include "Periodic observation of the construction to ensure compliance with the Construction Documents" and that the Scope of work involved "Periodic site visits (usually once a week)." (Exhibit 2004.)
15. On April 24, 2005, KCA and the Hashimotos entered into a contract for KCA's work and related services, as memorialized by that certain AIA Document B151-1997. (05/04/15 Tr. at 51:13-25, 53:1-5; 05/05/15 Tr. at 159:12-19; Cockett Decl. ¶ 9; Exhibit 2005.)
16. The AIA Agreement, which is the only agreement by and between KCA and the Hashimotos, was signed by Mr. Cockett as President of KCA, and by Dennis Hashimoto and Jessica Hashimoto in their individual capacities. Mr. Cockett was not a party to the contract. (Exhibit 2005; Exhibit 2032 at Admission No. 2.)
17. The scope of KCA's services was governed by the AIA Agreement. (05/05/15 Tr. at 100:5-8; Cockett Decl. ¶ 11.)
18. The AIA Agreement provided that KCA would prepare Schematic Design Documents, Design Development Documents, and Construction Documents, and would provide administration of the Contract for Construction. (Exhibit 2005.)
19. Section 2.6.5 of the AIA Agreement provided that KCA was required to "visit the site at intervals appropriate to the stage of the Contractor's operations . . . to become generally familiar with and to keep the Owner informed about the progress and quality of the portion of the Work completed . . ." (Exhibit 2005). Section 2.6.5 also provided that "the Architect shall not be required to make exhaustive or continuous on-site inspections to check the quality or quantity of the Work." (Exhibit 2005.)
20. The Hashimotos understood that KCA's role during the construction phase would be to periodically visit the site to see how the project was going. (05/04/15 Tr. at 17:19-22, 41:13-21.)
21. Section 2.6.6 of the AIA Agreement provided that "The Architect shall report to the Owner known deviations from the Contract Documents . . ." (emphasis added) (Exhibit 2005.)
22. Mrs. Hashimoto understood that KCA would advise them of any discrepancies between what was being constructed and what had been planned if KCA came to any knowledge indicating such discrepancies. (05/04/15 Tr. at 42:7-12.)
23. Section 2.6.5 of the AIA Agreement provided that "The Architect shall neither have control over or charge of, nor be responsible for, the construction means, methods, techniques, sequences or procedures, or for safety precautions and programs in connection with the Work, since these are solely the Contractor's rights and responsibilities under the Contract Documents." (Exhibit 2005.)
24. Section 2.6.6 of the AIA Agreement provided that "the Architect shall not be responsible for the Contractor's failure to perform the Work in accordance with the requirements of the Contract Documents." (Exhibit 2005.) Section 2.6.6 also provided that "The Architect . . . shall not have control over or charge of and shall not be responsible for acts or omissions of the Contractor, Subcontractors, or their agents or employees, or of any other persons or entities performing portions of the Work." (Exhibit 2005.)
25. Neither KCA nor Mr. Cockett ever assumed responsibility for the general contractor's scope of work or any subcontractor's scope of work. (Cockett Decl. ¶ 11.) KCA and Mr. Cockett had no responsibility for the means and methods of construction or for any contractor's performance of their scope of work on the project. (Cockett Decl. ¶ 11.)
26. Consistent with KCA's initial proposal, the AIA Agreement set forth the following Schedule of Payments:
(Exhibit 2004; Exhibit 2005.)
27. By November 10, 2006, KCA had completed architectural plans for the Hashimotos' new home. (Cockett Decl. ¶12; Exhibit 133.)
28. Jessica Hashimoto testified that she was very pleased with the renditions of the layouts set forth in the plans and that the plans included the things that she wanted. (05/04/15 Tr. at 48:9-12.)
29. Mr. Cockett recommended a structural engineer to the Hashimotos, for the project. (05/04/15 Tr. at 48:21-24.)
30. The Hashimotos did not follow Mr. Cockett's recommendation, electing to retain Xiang Yee of IMH Engineering, at the recommendation of a relative, to prepare the structural plans for their new home. (05/04/15 Tr. at 48:13-49:5.)
31. The Hashimotos entered into a written contract with IMH Engineering, under which IMH Engineering was obligated to provide structural drawings, conduct certain inspections during the construction phase, and provide appropriate certifications to the Department of Planning and Permitting. (05/04/15 Tr. at 49:3-16.)
32. Xiang Yee generated the structural plans after the architectural plans had already been generated by KCA. (05/04/15 Tr. at 47:17-25.)
33. Neither KCA nor Mr. Cockett was a party to the IMH Engineering Agreement. (05/04/15 Tr. at 89:9-13.)
34. The Hashimotos independently sought and obtained the services of David Evans of Evans Construction LLC, to serve as general contractor for the construction of the Hashimotos' new home. Mr. Evans was referred to the Hashimotos by a friend. (05/04/15 Tr. at 122:8-15.)
35. KCA, through Mr. Cockett, subsequently assisted the Hashimotos in obtaining a proposal for Evans Construction LLC's services. (05/05/15 Tr. at 24:24-25:18.)
36. At the time, Mr. Cockett was not familiar with Evans Construction LLC and had no prior relationship with David Evans. (05/04/15 Tr. at 121:25-122:2; Cockett Decl. ¶ 41)
37. On November 25, 2008, the Hashimotos entered into a Construction Contract with Evans Construction LLC. (05/04/15 Tr. at 15:23-16:1; J. Hashimoto Decl. ¶ 8; Exhibit 2021.)
38. The Construction Contract, to which KCA was not party, was separate from the AIA Agreement. (05/04/15 Tr. 15:23-16:3.)
39. Mrs. Hashimoto admitted that she was "fairly involved" in the construction of the new home (05/04/15 Tr. at 64:25-65:4), and that she was "involved extensively" in securing certain permits (05/04/15 Tr. at 56:2-5), including the pool permit (05/04/15 Tr. at 68:12-17) and trenching permit (05/04/15 Tr. at 73:13-15).
40. It is undisputed that, during the construction phase, the Hashimotos met at least weekly with Mr. Cockett and Mr. Evans. (05/04/15 Tr. at 56:6-14; 05/05/15 Tr. at 84:22-23, 160:21-161:2; Cockett Decl. ¶¶10 and 37.)
41. At the weekly meetings, the Hashimotos, Mr. Evans, and Mr. Cockett walked with the Hashimotos through the areas of the property that had been subject to work in the prior week and discussed the progress of the work. (05/04/15 Tr. at 56:15-57:2.)
42. Mrs. Hashimoto admitted that, to the extent that she had any concerns or questions regarding the status of the construction, she would raise those concerns during the weekly meetings. (05/04/15 Tr. at 57:3-12.)
43. Mrs. Hashimoto admitted that Mr. Cockett would respond to her concerns. (05/04/15 Tr. at 58:15-17, 60:8-15.)
44. All of the construction issues addressed at trial were contemporaneously addressed with the Hashimotos during the construction phase, as those issues arose. (05-05/15 Tr. at 161:3-9.)
45. Mrs. Hashimoto admitted that, in addition to the weekly meetings, there were occasionally additional meetings, which she attended. Further, Mrs. Hashimoto conceded that she sent emails almost daily to Mr. Cockett and Mr. Evans during the construction phase. (05/04/15 Tr. at 64:15-24.)
46. Mrs. Hashimoto also admitted that there were times when she visited the construction site on days on which no meetings were scheduled, without Mr. Evans or Mr. Cockett. (05/04/15 Tr. at 56:9-11, 63:16-22.)
47. Mrs. Hashimoto admitted that she was generally familiar with the design of the home. (05/04/15 Tr. at 57:3-12.)
48. Mrs. Hashimoto testified that she was involved in the selection of some of the materials that went into her home, including all of the tiles for the back porch areas. (05/04/15 Tr. at 110:21-111:22.)
49. During the construction phase, there were several items that had not been contemplated under the architectural plans that were added and/or changed during the construction phase. (05/04/15 Tr. at 42:13-17.)
50. Mrs. Hashimoto admitted that changes agreed upon during the construction phase were not reduced to a change order or otherwise committed to writing. (05/04/15 Tr. at 42:13-44:1, 110:3-9.)
51. It is undisputed that no formal change orders were prepared during this project; however, all changes were discussed and approved by the Hashimotos. (05/04/15 Tr. at 42:13-20; 110:10-11; 05/05/15 Tr. at 60:12-15.)
52. The directives and approvals discussed at weekly meetings by the Hashimotos with KCA and Evans Construction LLC, through Mr. Cockett and Mr. Evans, effectively constituted construction change directives. (05/05/15 Tr. at 84:13-23, 165:3-13.)
53. Mrs. Hashimoto admitted that neither KCA nor Mr. Cockett charged the Hashimotos for any of the plans generated by KCA during the construction phase, with regard to any project changes during construction, although KCA was entitled to charge for those services. (05/04/15 Tr. at 100:22-101:3.)
54. The architecture plans initially provided for a cabana to be located on the "Sandy Beach" side of the property. (05/04/15 Tr. at 23:17-24:2; 05/05/15 Tr. at 161:10-21.)
55. Mr. Hashimoto requested that the cabana be relocated. (05/05/15 Tr. at 161:22-163:5.)
56. It is undisputed that the Hashimotos specifically approved the relocation of the cabana to the other side of the property. (05/04/15 Tr. at 31:8-14, 43:11-44:1, 100:7-21.)
57. The cabana provided for on the original architecture plans did not have a wraparound deck. (05/04/15 Tr. at 32:25-33:2.)
58. Mr. and Mrs. Hashimoto requested a wraparound deck be added to the cabana. (05/04/15 Tr. at 33:3-8.)
59. During the construction phase, KCA generated new drawings to accommodate the relocation of the cabana and the addition of a wraparound deck. (05/04/15 Tr. at 33:9-12.)
60. The new location of the cabana required the addition of a wall and additional grading work. (05/05/15 Tr. at 163:10-25.)
61. Mr. and Mrs. Hashimoto were aware that the original architecture plans did not provide for an outdoor bathroom near the pool. (05/04/15 Tr. at 28:19-22, 43:6-10.)
62. It is undisputed that, during the construction phase, the parties discussed the addition of an outside bathroom. (05/04/15 Tr. at 28:11-18, 108:21-110:2.)
63. As a result of the discussions, the Hashimotos agreed to have Evans Construction LLC build an outdoor bathroom at an additional cost. (05/04/15 Tr. at 28:23-29:2, 109:11-15.)
64. Mrs. Hashimoto understood that Mr. Evans, as the contractor, framed the front of the house in accordance with the structural plans. (05/04/15 Tr. at 86:9-12.)
65. After the house had been framed, Mr. Cockett and Mr. Evans discovered that there was a discrepancy between the original architectural plans and the subsequent structural plans. (05/05/15 Tr. at 75:24-76:9, 116:1-3, 116:12-17.)
66. Mr. Cockett and Mr. Evans, upon realizing the discrepancy, discussed the issue with the Hashimotos and gave them the option of redoing the front in accordance with the architectural drawing, but the Hashimotos elected to leave it as it had been built. (05/05/15 Tr. at 84:25-85:9, 126:18-127:19.)
67. Mr. Cockett testified that he generated a drawing for the Hashimotos to illustrate the difference between the architectural and structural plans, and that during a regular meeting on site, he showed them the drawing and explained the discrepancy. (05/06/15 Tr. at 14:14-15:1; and Exhibit 2038.)
68. Mr. Cockett testified that after the discovery that the structural plans were five feet off from the architectural plans, such that the roofs were not lining up, he attempted to contact the structural engineer, Mr. Yee, but was not able to reach him. (05/05/15 Tr. at 116:1-17.)
69. Mrs. Hashimoto, who as between her and her husband was primarily involved during the construction phase, admitted that she was made aware of the discrepancy between the structural plans and the architectural plans, at some point. (05/04/15 Tr. at 84:13-86:7, 86:24-87:3, 95:12-17.)
70. Mrs. Hashimoto testified that she did not make any effort to contact Mr. Yee to find out why his plans were inconsistent with KCA's plans, nor did she ask that others, such as Mr. Cockett, contact Mr. Yee. (05/04/15 Tr. at 88:17-89:8.)
71. There is no dispute that Mr. Cockett and Mr. Evans discussed the issue of the front of the home with the Hashimotos, during the framing phase of construction. (05/04/15 Tr. at 95:18-97:24, 99:11-100:6.)
72. Mr. Evans testified that the Hashimotos did not take issue with the front entry as constructed, until the end of the project and around the time that Mr. Evans' relationship with the Hashimotos deteriorated, at which point Mrs. Hashimoto began demanding that everything be returned to the original plans. (05/05/15 Tr. at 85:4-22.)
73. Neither the proposal nor the AIA Agreement included drawings for a swimming pool as part of the scope of KCA's work. (05/06/15 Tr. at 17:2-7; Exhibit 2004; Exhibit 2005.)
74. After the project commenced and at the request of the Hashimotos, KCA drafted drawings for a pool. KCA did not charge, nor did it receive, compensation for this work. (05/06/15 Tr. at 17:14-18.)
75. Although the Hashimotos initially had a bid from C&J Contracting to construct the pool, they ultimately chose to have Mr. Evans and his subcontractor build the pool. (05/05/15 Tr. at 111:17-22.)
76. It is undisputed that there were issues related to the construction of the pool. (05/05/15 Tr. at 31:1-6, 52:9-12, 83:3-11, 135:7-16.)
77. Mr. Evans testified that he intended to provide the resources to fix the pool and was bringing in a new contractor to fix it. (05/05/15 Tr. at 83:6-25.)
78. Mrs. Hashimoto acknowledged that Mr. Evans was aware of the issues with the pool and was seeking to have those issues addressed. (05/05/15 Tr. at 41:11-20.)
79. In an effort to assist the Hashimotos in resolving the pool issues, Mr. Cockett obtained another proposal from C&J Contracting, a licensed pool contractor, for repair and completion of the pool. (05/04/15 Tr. at 115:6-116:4; 05/05/15 Tr. at 44:23-45:5.)
80. The architectural plans originally provided for the electrical meter and box to be located on the right side of the property. (05/04/15 Tr. at 112:1-11; Cockett Decl. ¶ 24b.)
81. Mr. Cockett explained that the proposed location of the electrical meter and box was not approved by the HECO inspector. (Cockett Decl. ¶ 24b.)
82. Mr. Cockett explained that the ultimate location of the electrical meter and box was chosen as the result of a consultation with HECO. (Cockett Decl. ¶ 24b.)
83. Mrs. Hashimoto testified that she called HECO and spoke to an employee named Gil Gabriel, who told her that "HECO does not tell people where to put the box" and that "you can place it wherever you want." (05/05/15 Tr. at 18:18-19:7.)
84. However, after having the phone conversation with Mr. Gabriel, Mrs. Hashimoto sent Mr. Gabriel an email in which she attempted to recap their telephone conversation. (05/05/15 Tr. at 42:7-25.)
85. Mrs. Hashimoto admitted that in Mr. Gabriel's responsive email, he corrected Mrs. Hashimoto with regard to what he told her during their conversation. (05/05/15 Tr. at 43:1-15.)
86. Specifically, Mr. Gabriel clarified that he did not say that HECO has no problems with the meter being located on the right side of the house at the bottom of the driveway. (05/05/15 Tr. at 43:5-15; Exhibit 2010.)
87. Mr. Gabriel also clarified that HECO has the option of advising where the meter can or cannot be located and explained that he agreed to the current location of the meter and box. (05/05/15 Tr. at 43:5-15; Exhibit 2010.)
88. Although reluctant to concede this point, Mrs. Hashimoto could not point to any evidence indicating that the location of the electrical meter was decided without any input from HECO. (05/04/15 Tr. at 114:16-115:5.)
89. The plans originally called out for strip drains. (05/04/15 Tr. at 133:17-19.)
90. Mr. Cockett testified that the strip drains were unnecessary because the concrete slabs were poured in a way such that there would be positive drainage away from the pool and doors. (Cockett Decl. ¶ 23k.)
91. Mrs. Hashimoto admitted that Mr. Cockett disclosed to her that he felt the strip drains were not necessary. (05/04/15 Tr. at 133:20-3.)
92. After Mrs. Hashimoto reported that there was ponding after a heavy rain, the strip drains were added to the punchlist. (05/04/15 Tr. at 134:4-20.)
93. Mrs. Hashimoto understood Mr. Cockett's notations on the punchlist to mean that they were going to try to fix it so it wouldn't pond. (05/04/15 Tr. at 135:11-136:13.)
94. The architectural plans provided for Monier tiles to be used on the roof. (05/05/15 Tr. at 118:9-11.)
95. The roof tiles that were ultimately installed at the project were chosen by the Hashimotos from samples that were shown to them. (05/05/15 Tr. at 50:7-8, 120:7-10.)
96. At the time of the project, Mr. Evans believed that his license enabled him to do general framing and building, concrete and pool work, and installation of flooring. (05/05/15 Tr. at 81:11-22.)
97. Mr. Cockett did not know whether there were any unlicensed subcontractors on the project, but to the extent that he became aware of any such workers, he attempted to assist the Hashimotos in resolving those issues. (05/05/15 Tr. at 166:18-167:8.)
98. The retainer of subcontractors is the contractor's responsibility. (05/05/15 Tr. at 166:24-167:167:4.)
99. Mrs. Hashimoto discovered that the electrical contractor from Oahu Electric was not in good standing with regard to his license and notified Mr. Evans and Mr. Cockett regarding the same. (05/04/15 Tr. at 67:25-68:5.)
100. Mrs. Hashimoto later learned that the electrical contractor from Oahu Electric Inc. was qualified as an electrical contractor within the state, and that the problem with their status was simply a matter of re-registering their business. (05/04/15 Tr. at 68:1-11.)
101. Mrs. Hashimoto was involved in selecting an AC subcontractor for the project and consulted with Mr. Evans in that regard. (05/04/15 Tr. at 69:9-11, 70:18-24.)
102. Mrs. Hashimoto looked up the plumber's information and discussed with Mr. Cockett the issue of the plumber being licensed. (05/04/15 Tr. at 71:8-17.)
103. Mrs. Hashimoto had discussions with Mr. Evans concerning the pool contractor. (05/04/15 Tr. at 72:7-10.)
104. Under the Hashimotos' written contract with IMH Engineering, Mr. Yee was responsible for conducting certain inspections during the construction phase and for providing appropriate certifications to the Department of Planning and Permitting. (05/04/15 Tr. at 49:3-16.)
105. It is undisputed that for a period during the construction phase, Mr. Yee was out of the country and unavailable to conduct inspections. (05/04/15 Tr. at 53:12-14; Yee Decl. (Rebuttal) ¶ 7.)
106. Although Mrs. Hashimoto was aware that Mr. Yee sometimes left the country for vacation, Mrs. Hashimoto admitted that she did not make Mr. Evans aware of this fact and that she was not concerned that Mr. Yee would not be available during the phase of construction that required a special inspection. (05/04/15 Tr. at 53:12-21.)
107. Mr. Cockett had made attempts to contact Mr. Yee for clarification of structural issues during the course of the project, but was unsuccessful. Mr. Cockett did not, however, attempt to contact Mr. Yee for purposes of scheduling an inspection, as that was not his role or responsibility. (05/05/15 Tr. at 169:16-170:11.)
108. Although Mrs. Hashimoto believed that Mr. Cockett had a responsibility under his contract to contact the structural engineer for purposes of the inspections (05/04/15 Tr. at 50:10-13), she could not point to any provision in the AIA Agreement upon which she relied in reaching this conclusion. (05/04/15 Tr. at 53:6-11.) The AIA Agreement does not contain such an obligation. (Exhibit 2005.)
109. Mrs. Hashimoto later became aware that the special inspections had not yet been completed by Mr. Yee. Mr. Cockett testified that in May 2010, Mr. Yee subsequently visited the site and was told by Mr. Evans that anything required for Mr. Yee to be able to complete the inspections, such as opening up walls for visual inspection, would be done in order to allow for completion and certification of conditions. However, Mr. Yee refused, stating that he did not want to do the inspections. (05/05/15 Tr. at 170:12-24.)
110. Mrs. Hashimoto testified that much more recently, in the process of continuing work on her home, she has consulted with Mr. Yee who conceded that that special inspections can be completed and properly certified, in satisfaction of DPP requirements. (05/04/15 Tr. at 53:22-54:11.)
111. Notwithstanding the foregoing, Mr. Cockett conducted special inspections covering (17) Complete Load Path and Uplift Ties and (18) Termite Protection (Cockett Decl. ¶ 47), despite the fact that these items were not under the scope of KCA's contract, so that the project could continue. (05/05/15 Tr. at 172:19-21.)
112. Although Mr. Cockett was qualified, per City and County standards, to perform other special inspections, Mr. Cockett only did the special inspections that he personally felt competent to conduct. (05/05/15 Tr. at 170:25-171:8.)
113. Prior to certifying (17) Complete Load Path and Uplift Ties, Mr. Cockett verified that the H2.5 straps on the rafters, the strapping from the second floor to the first floor, and the hold-downs, as provided on the structural plans, had all been installed at the property. (05/05/15 Tr. at 171:9-23.)
114. Mr. Cockett certified (18) Termite Protection based on Mr. Evans' representation that BTB had been installed and based on documentation from the termiticide company that the property had been sprayed with termiticide. (05/05/15 Tr. at 171:24-172:15.)
115. Roughly 1600 square feet of the property was sprayed with termiticide. (05/05/15 Tr. at 54:1-8; Exhibit 2022; Exhibit 2023.)
116. The square footage of the concrete slab was roughly 1600 square feet; therefore, according to the Red-X documentation, the required treatment area was satisfied. (05/05/15 Tr. at 54:9-19; 05/06/15 Tr. at 16:8-20; 37:3-38:19; Exhibit 133.)
117. At the time Mr. Cockett signed the certifications, it was his belief that termiticide had been properly applied to this project. (05/06/15 Tr. at 43:10-13.)
118. Mrs. Hashimoto understood that Mr. Cockett, as the architect of record, had the ability to sign for certain special inspections and that Mr. Cockett signed certifications solely with regard to (17) Complete Load Path and Uplift Ties and (18) Termite Protection. (05/04/15 Tr. at 80:14-20.)
119. The Hashimotos had numerous discussions with Mr. Evans and Mr. Cockett regarding the issue of additional walls to be built as a result of the cabana relocation. (05/04/15 Tr. at 103:19-104:3.)
120. The Hashimotos discussed with Mr. Evans and Mr. Cockett the fact that they had great concerns about the construction and placement of the walls. (05/04/15 Tr. at 103:2-9.)
121. Mr. Cockett told Mrs. Hashimoto that if the walls were not built the way she wanted them, he would have Evans Construction build it the way they wished. (05/05/15 Tr. at 159:3-7; Exhibit 104.)
122. Because of the Hashimotos' concerns regarding the rock walls, Mr. Cockett recommended that the Hashimotos hire a geotechnical consultant to determine the condition of the walls. (05/04/15 Tr. at 127:1-25.)
123. Mr. Evans sent an email to Mrs. Hashimoto, apologizing for her dissatisfaction with the rock walls and offering to fix areas that were structurally unsound. (05/04/15 Tr. at 104:10-105:2; Exhibit 2011.)
124. Subsequent to Mr. Evans' email, Mrs. Hashimoto had discussions with Mr. Evans concerning the walls. (05/04/15 Tr. at 105:16-18.)
125. Evans testified that there were many portions of the rock walls that his company was trying to fix. (05/05/15 Tr. at 49:17-23.)
126. Mrs. Hashimoto ultimately sued Evans Construction. (05/04/15 Tr. at 105:19-106:12.)
127. One of the steel beams in the project was notched. (05/05/15 Tr. at 61:7-11; J. Hashimoto Decl. ¶ 18x; Exhibit 94.)
128. Page S3.3, Section F of the structural plans provided for a notch in one of the steel beams. (Exhibit 133; 05/05/15 Tr. at 62:14-63:6.)
129. Mr. Evans testified that Mr. Cockett always told him to follow the plans and that if any of the steel beams were notched, it was because that was what the structural plans had provided. (05/05/15 Tr. at 60:23-61:2.)
130. By comparing the details in the photograph of the notched beam against the details in the structural plans, Mr. Cockett demonstrated that the notched beam in the photograph was the same beam that was required to be notched in the structural plans. (05/05/15 Tr. at 167:11-169:9.)
131. Although Mrs. Hashimoto claimed that the notched beam in the photograph was not the same beam that was notched in the structural plans, she admitted that she did not take the photograph and that she is not a structural engineer. (05/06/15 Tr. at 25:22-26:17, 30:11-31:10.)
132. Irrespective of whether a beam was improperly notched, there was no allegation and certainly no testimony, indicating that Mr. Cockett knew or should have been aware that a beam had been improperly notched. (05/04/05 Tr., 05/05/15 Tr., and 05/06/15 Tr., in their entirety.)
133. Mr. Hashimoto testified that the sewer lines were not placed as Mr. Hashimoto had indicated. (05/04/15 Tr. at 22:11-13.)
134. Mr. Hashimoto discussed with Mr. Cockett and Mr. Evans changing the condition of the sewer lines to satisfy this concern. (05/04/15 Tr. at 22:14-18.)
135. Mr. Hashimoto understood that Mr. Evans had agreed to bury, properly cover, and properly locate the sewer line before completion of the project. (05/04/15 Tr. at 22:19-24.)
136. Mr. Evans testified that, towards the end of the project, Mrs. Hashimoto began demanding that everything be returned to the original plans. (05/05/15 Tr. at 85:4-22.)
137. By May 2010, the Hashimotos were well aware of the numerous construction issues raised in this trial. (05/05/15 Tr. at 29:7-31:9.)
138. By July of 2010, the Hashimotos' relationship with Mr. Evans had become strained. (05/05/15 Tr. at 38:20-24.)
139. During the summer of 2010, the Hashimotos discussed with Mr. Cockett the fact that they were considering hiring an independent construction representative named Arne LaPrade to look at the property, make observations, and identify potential issues. (05/04/15 Tr. at 128:4-23.)
140. Mr. Cockett agreed that hiring Mr. LaPrade would be useful for the Hashimotos' project. (05/04/15 Tr. at 128:24-129:2.)
141. After the Hashimotos retained Mr. LaPrade, Mr. LaPrade did a site inspection and also walked through the property with Mr. Evans and Mr. Cockett. (05/04/15 Tr. at 129:6-17.)
142. Mr. Evans expressed to Mrs. Hashimoto that he wanted to finish the house and requested a punchlist of things the Hashimotos wanted him to complete towards finishing the project. (05/05/15 Tr. at 39:5-40:11; Exhibit 16.)
143. Mr. LaPrade generated a list of construction items that deviated from the construction plans, which list was given to Mr. Cockett for his review and explanation. (05/04/15 Tr. at 129:18-18; Exhibit 2014.)
144. By this time, the project was approximately 90% complete. (05/04/15 Tr. at 35:2-8.)
145. Mr. Hashimoto admitted that Mr. Evans met with the Hashimotos to address the issues on the list and that Mr. Cockett was involved in trying to assist both Mr. Evans and the Hashimotos in resolving these issues. (05/04/15 Tr. at 35:17-36:3.)
146. Mr. Cockett provided his explanation as to the items on Mr. LaPrade's list by notating thereon "C" for "changed from original," "F" for "fix," "N" for "not yet complete," "P" for "punchlist," and/or "S" for "subcontractor to address." (05/04/15 Tr. at 130:16-132:3; Exhibit 2014.)
147. Mrs. Hashimoto admitted that, by making such notations on Mr. LaPrade's punchlist, Mr. Cockett was trying to address each of the issues identified therein. (05/05/15 Tr. at 38:9-14.)
148. Mr. Cockett told Mrs. Hashimoto that it would be in their best interest to have Mr. Evans come back to finish the project and offered to call Mr. Evans for that purpose. (05/04/15 Tr. at 125:19-24.)
149. Mr. Cockett explained that it's good for the contractor who has done a majority of the work to finish the job because such contractor would already be familiar with the job and could finish it faster and for less money than a new contractor could. (05/05/15 Tr. at 144:10-17.)
150. Mr. Evans eventually retained an attorney and indicated that he was interested in completing the project, but with certain conditions. (05/04/15 Tr. at 124:19-125:13.)
151. Ultimately, the Hashimotos did not agree to Mr. Evans' conditions. (05/04/15 Tr. at 125:14-16.)
152. The project never reached substantial completion, which refers to the point at which construction is complete enough such that the building can be occupied by the user. (05/05/15 Tr. at 166:3-13.)
153. KCA continued to work with Plaintiffs after construction had stopped and assisted Plaintiffs in obtaining proposals from other contractors to either finish the job. (Cockett Decl. ¶ 36.)
154. In September 2010, while the project was still incomplete, Jessica Hashimoto asked Jon Goo, an inspector from the Department of Planning and Permitting, to perform an inspection of the property. (05/04/15 Tr. at 73:25-2; 75:21-24.)
155. Mr. Goo issued a notice of violation, dated September 30, 2010, for the Hashimotos' property. (05/04/15 Tr. at 73:16-74:2; Exhibit 17.)
156. As of November 10, 2010, after the Hashimotos' relationship with Mr. Evans had deteriorated, the Hashimotos still trusted Mr. Cockett. (Trial Tr. 136:18-137:15; Exhibit 15.)
157. Plaintiffs eventually ceased all communications with KCA and stopped returning Mr. Cockett's phone calls. (Cockett Decl. ¶ 36.)
158. Although Mrs. Hashimoto testified that, after November 2010, additional issues of which she was previously unaware were brought to her attention by experts they hired, she could not identify a single one of those issues. (05/04/15 Tr. at 140:3-24.)
159. None of the Hashimotos' experts or consultants were identified in this case. (05/04/15 Tr. at 140:14-141:2.)
160. There were only four invoices that KCA sent to the Hashimotos for professional services rendered by KCA, which invoices were dated May 2005, July 2005, December 2006, and December 2008. (05/04/15 Tr. at 45:23-46:10; Exhibit 2015.) Mr. Hashimoto was unable to point to any invoices that came from Mr. Cockett, individually, rather than from KCA. (05/04/15 Tr. at 20:4-8.)
161. KCA received four payments from the Hashimotos, as follows:
162. All of the payments that the Hashimotos made to KCA were made by check payable to the firm Keith Cockett & Associates, Inc. (05/04/15 Tr. at 47:5-16.)
163. Mrs. Hashimoto had no reason to believe that the payments were not consistent with the compensation set forth in the AIA Agreement. (05/04/15 Tr. at 47:8-13.)
164. Mr. Cockett did not receive any gifts or compensation from Mr. Evans and Mr. Evans did not refer any business to Mr. Cockett. (Cockett Decl. ¶ 44; Evans Decl. ¶ 20.)
165. Section 2.6.9 of the AIA Agreement concerned Certificates for Payment. (05/05/15 Tr. at 164:4-8; Exhibit 2005.)
166. A Certificate for Payment contains a contractor's representation that he has completed a certain portion of the project and his request for payment for that work. (05/05/15 Tr. at 164:24.)
167. Certificates for Payment are typically utilized with regard to commercial properties and were not incorporated in the Hashimotos' project. (05/05/15 Tr. at 164:9-11, 164:25-165:2.)
168. It is undisputed that all of Evans Construction's invoices were sent directly to Jessica Hashimoto. (05/04/15 Tr. at 116:11-14; 05/05/15 Tr. at 82:9-17.)
169. Mr. Evans testified that he and Mrs. Hashimoto dealt directly with each other regarding any issues concerning money. (05/05/15 Tr. at 82:12-17.)
170. Although Mrs. Hashimoto testified that every single bill on the project was sent to Mr. Cockett for his review and approval, she admitted that the invoices referenced in Exhibits 108, 113, 118, 123, 31, and 32 were the only invoices on which Mr. Cockett was asked to comment. (05/04/15 Tr. at 116:18-124:13.)
171. Mrs. Hashimoto admitted that one of Mr. Cockett's emails requested clarification concerning payment arrangements with Evans Construction, which indicated that he did not know what the Hashimotos' arrangement was with Evans Construction concerning a percentage retainer. (05/04/15 Tr. at 120:2-20, 123:2-7.)
172. Mrs. Hashimoto also admitted that she did not consult with Mr. Cockett on the bill for Ichimura Engineering's trenching permit and simply advised him that she was paying it. (05/04/15 Tr. at 119:13-120:1.)
173. Evans Construction did additional work authorized by the Hashimotos that was not contemplated under the original contract. (05/06/15 Tr. at 28:21-29:17.)
174. The Hashimotos did not pay Evans Construction for the additional grading work. (05/06/15 Tr. at 28:16-20.)
175. Mrs. Hashimoto acknowledged that she did not expect the additional work to be done by Evans Construction for free. (05/06/15 Tr. at 29:18-23.)
176. Mr. Cockett testified that if an item that the Hashimotos had paid for was eliminated, he would have tried to obtain a credit for them at the end of the project. (05/05/15 Tr. at 140:6-20.)
177. Mr. Evans testified that, typically, the settling up of monies owed is dealt with at the conclusion of the project, and he expected that any credits that were due to the Hashimotos would be taken into account at that point. (05/05/15 Tr. at 82:18-83:2.)
178. There was no evidence indicating that KCA and/or Mr. Cockett engaged in any illegal or inappropriate conduct, to the extent that Mr. Cockett reviewed and/or commented on any of the invoices issued by Evans Construction LLC to the Hashimotos. (05/04/15 Tr., 05/05/15 Tr. and 05/06/15 Tr., in their entirety.)
179. With the exception of inputting invoices and writing checks in QuickBooks, Mr. Cockett's accountant maintains his financial information. (05/05/15 Tr. at 150:1-5; 05/06/15 Tr. at 46:3-47:3.)
180. Mr. Cockett directed his accountant to produce the requested documents, and to his knowledge, his accountant produced all available documents. (05/05/15 Tr. at 150:6-10, 152:17-22.)
181. All documents produced by Mr. Cockett's accountant were forwarded by Mr. Cockett to his counsel. (05/05/15 Tr. at 150:8-11; 150:21-25.)
182. Mr. Cockett testified that he had his accountant turn over his QuickBooks files and that he forwarded those files on to his counsel. (05/05/15 Tr. at 150:15-25; 05/06/15 Tr. at 34:16-35:7.)
183. To the extent that there is information contained within Mr. Cockett's electronic QuickBooks files, said information is duplicative of information contained in other disclosures. (05/06/15 Tr. at 11:3-12:2.)
184. Mr. Muzzi examined Mr. Cockett at the Rule 2004 Examination regarding KCA's pending contracts, in part based upon a list of KCA's outstanding permits that Mr. Muzzi obtained from DPP. (05/06/15 Tr. at 12:3-13:4.)
185. Mr. Cockett answered Mr. Muzzi's questions regarding all of the projects and permits on the DPP list, which should have included all of KCA's contracts that were open at that time. (05/06/15 Tr. at 12:25-13:11.)
186. To Mr. Cockett's knowledge, he, through his counsel, disclosed all financial information requested by the Hashimotos. (05/06/15 Tr. at 13:17-20.)
Upon consideration of the entire record and the law, and applying the law to the evidence, including burdens of proof, the Court makes the following conclusions of law. To the extent that any conclusion of law may be deemed a finding of fact, it shall also be considered a finding of fact.
1. This court has jurisdiction over this adversary proceeding, which is a core proceeding in bankruptcy. 28 U.S.C. § 157 (b)(2)(I). Venue is proper.
2. The Hashimotos contend that their claims against Mr. Cockett are not dischargeable in bankruptcy based on sections 523(a)(2)(A) and 523(a)(6).
3. Exceptions to discharge are to be construed strictly against the creditor and liberally in favor of the debtor.
4. The creditor seeking to have the debt excepted from discharge has the burden of proving each element by a preponderance of the evidence.
5. The Hashimotos seek to hold Mr. Cockett personally liable for KCA's obligations by alleging that Mr. Cockett is the "alter ego" of KCA.
6. Unless otherwise provided in the articles of incorporation a shareholder of a corporation is not personally liable for the acts or debts of the corporation except that such shareholder may become personally liable by reason of such shareholder's own acts or conduct. H.R.S. § 414-83.
7. Hawaii courts are reluctant to disregard the corporate entity.
8. There is no specified or minimum number of stockholders that is required for valid corporate existence. The fact that a sole or principal stockholder dominates a corporation violates no statutory requirement, is not opposed to public policy, and constitutes no fraud on creditors.
9. The fact that Keith Cockett is the President and sole shareholder of KCA, alone, does not warrant a piercing of the corporate veil.
10. Before a corporation's acts and obligations can be legally recognized as those of a particular person, and vice versa, it must be made to appear that [1] the corporation is not only influenced and governed by that person, but that there is such a unity of interest that the individuality, or separateness, of such person and corporation has ceased, and [2] that the facts are such that an adherence to the fiction of the separate existence of the corporation would, under the particular circumstances, sanction a fraud or promote injustice.
11. Mr. Cockett's only involvement with the AIA Agreement was in his capacity as an officer and director of KCA, which is a valid corporation registered to do business in the State of Hawaii and in good standing.
12. Mr. Cockett is not the alter ego of KCA, as KCA maintains its own bank account, is currently active and in good standing, and issues an annual K-1 to Mr. Cockett.
13. The Hashimotos have presented no evidence that recognizing the separate existence of KCA would somehow sanction a fraud or promote injustice.
14. The Hashimotos have failed to establish that Mr. Cockett is the alter ego of Keith Cockett & Associates, Inc. Based upon this finding, alone, Plaintiffs claims must fail.
15. Language in the AIA Agreement specifically limited the scope of
16. KCA's work and its liability during the construction phase of the project.
17. KCA met its duty under the AIA Agreement to periodically visit the site and monitor the progress of construction.
18. KCA met its duty under the AIA Agreement to keep the Hashimotos informed about the progress and quality of the work. KCA had no duty to report to the Hashimotos deviations of which it was unaware.
19. The defects and deficiencies for which the Hashimotos are attempting to hold Mr. Cockett liable fall beyond the scope of KCA's responsibility under the AIA Agreement.
20. In order to prevail under section 523(a)(2)(A), a creditor must prove that the debt is "for . . . money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained, by . . . false pretenses, a false representation, or actual fraud." To establish "false pretenses, a false representation, or actual fraud," the creditor must establish "(1) misrepresentation, fraudulent omission or deceptive conduct by a debtor; (2) knowledge of the falsity or deceptiveness of his statement or conduct; (3) an intent to deceive; (4) justifiable reliance by the creditor on the debtor's statement or conduct; and (5) damage to the creditor proximately caused by its reliance on the debtor's statement or conduct.
21. When KCA obtained funds from the Hashimotos, Mr. Cockett did not make any misrepresentations or fraudulent omissions, and he did not engage in any fraudulent conduct. Mr. Cockett had no intent to deceive the Hashimotos. The Hashimotos did not rely on any false or misleading statements or conduct of Mr. Cockett. Mr. Cockett substantially performed his obligations under the AIA Agreement.
22. When Evans Construction obtained funds from the Hashimotos, Mr. Cockett did not make any misrepresentations or fraudulent omissions, and he did not engage in any fraudulent conduct. Mr. Cockett had no intent or incentive to deceive the Hashimotos, as he did not receive any additional compensation during the construction phase of the project from either the Hashimotos or Evans Construction. The Hashimotos did not rely on any false or misleading statements or conduct of Mr. Cockett.
23. The Hashimotos have failed to meet their burden of proofing each element of this claim, such that a claim under section 523(a)(2)(A) must also fail.
24. In order to prevail under section 523(a)(6), the creditor must prove that the debt is "for willful and malicious injury by the debtor to another entity or to the property of another entity." In order to establish "willful and malicious injury" under § 523(a)(6), Plaintiffs must meet their burden of proving both "willful" and "malicious" injury.
25. A willful injury is a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury.
26. A "malicious act" is (1) a wrongful act, (2) done intentionally, (3) which necessarily causes injury, and (4) is done without just cause or excuse.
27. The Hashimotos have not established that Mr. Cockett inflicted willful and malicious injury upon them in connection with the formation or performance of the AIA Agreement.
28. The Hashimotos have not presented any evidence that Mr. Cockett intended any injury to Plaintiffs.
29. Pursuant to the scheduling order, the Hashimotos waived their claim for nondischargeability under 11 U.S.C. § 727(a)(3), as they did not address said claim in their written direct testimony.
30. Notwithstanding the waiver of this claim, the Hashimotos have failed in their burden to establish concealment of financial information, such that Plaintiffs claim under 11 U.S.C. § 727(a)(3) must also fail.
