Zhang v. You

NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
20-NOV-2024
08:13 AM
Dkt. 48 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAI#I

CHUN MEI ZHANG, Plaintiff-Appellee,
v.
MING YU YOU, Defendant-Appellant

APPEAL FROM THE CIRCUIT COURT OF THE FIRST CIRCUIT
(CASE NO. 1CC161001683)

SUMMARY DISPOSITION ORDER
(By: Leonard, Acting Chief Judge, McCullen and Guidry, JJ.)

Defendant-Appellant Ming Yu You (You), appeals from the

June 25, 2021 Final Judgment (Judgment) entered by the Circuit

Court of the First Circuit (Circuit Court), following a

jury-waived trial.1 You also challenges the Circuit Court's

Findings of Fact, Conclusions of Law, and Judgment entered on

March 28, 2019 (FOFs/COLs/Judgment).2

1
Judgment was entered by the Honorable John M. Tonaki.
2
The Honorable James S. Kawashima presided over the trial and
entered the FOFs/COLs/Judgment.
NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

You raises four points of error on appeal, contending

that the Circuit Court erred: (1) when it found You liable for

unfair trade practices (UDAP) under Hawaii Revised Statutes (HRS)

480-2 (2008); (2) when it found You fraudulently induced

Plaintiff-Appellee Chun Mei Zhang (Zhang) into an agreement to

purchase a restaurant from You; (3) when it awarded $6,250.00 in

attorney's fees to Zhang; and (4) if it awarded $41,053.64 in

attorney's fees to Zhang.

Upon careful review of the record and the briefs
submitted by the parties, and having given due consideration to

the arguments advanced and the issues raised by the parties, we

resolve You's points of error as follows:

Zhang's May 5, 2017 First Amended Complaint (Complaint)

included three counts: (1) Intentional Misrepresentation/Fraud

based on You's willful misrepresentation to Zhang that she owned

and operated a Chinese restaurant on December 20, 2015, and You's

subsequent inducement of Zhang into entering a purchase agreement

to buy the restaurant for $25,000 (Fraudulent Inducement to Enter

Contract; Count One); (2) Intentional Misrepresentation/Fraud

based on You's concealment of the fact that You previously sold
the unsuccessful restaurant to others, intended to use part of

Zhang's $25,000 payment to rescind that sale, and willfully put

Zhang into a losing position in a bad business whereby Zhang was

caused to incur additional damages (Fraud Causing Additional

Damages; Count Two); and (3) Breach of Contract based on You's

registration and display of a food license under You's name and

2
NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

repeated demands to return equipment and tools (Breach of

Contract; Count Three). The Complaint demanded judgment against

You as follows:
DEMANDS
Therefore, [Zhang] demand judgment against [You] as follows:

1. The sale of business contract is rescinded by the
Court order on the reasons of intentional
misrepresentation or fraud.
2. [Zhang] should receive the $25000 payment back upon
the rescission of sale contract.
3. [Zhang] should be entitled to compensate her loses
[sic] of $20000 in the operating the business as the
subsequent damage caused by [You].

4. [Zhang] should be entitled to the punitive damages.
5. [Zhang] should be entitled for Court cost and attorney
fee.

6. [Zhang] should be entitled for all available interest
on damages.

7. In addition, [Zhang] should be entitled for
statutorily threefold punitive damage $135,000
($2500+$2000) [sic] x 3 = $135,0000.

(Emphasis added).

After the three-day bench trial, the Circuit Court

found and concluded, inter alia, that Zhang's claim for

contractual rescission based on fraudulent inducement was

properly brought and sufficiently supported, and that Zhang was

entitled to rescind the purchase contract, be awarded, i.e.

returned, the $25,000 purchase price (in conjunction with an

order for the transfer of any title back to You), along with

prejudgment interest, and reasonable attorney's fees grounded in

assumpsit in an amount up to $6,250.00. The Circuit Court

further found and concluded that Zhang's claim for additional

3
NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

post-purchase damages was too speculative and Zhang was not

entitled to an award on damages on the claim.

The Circuit Court then found and concluded that You

committed deceptive acts in the conduct of commerce in violation

of HRS § 480-1 (2008), "including without limitations, (a)

misleading Plaintiff regarding the Restaurant's ownership and

profitability, (b) exploiting [Zhang's] personal history as a

former Shanghai resident and (c) representing [herself] as

trustworthy based on her role as an active community member."
Without any award of compensatory damages, the Circuit Court

awarded Zhang, pursuant to HRS § 480-13(b) (2008), treble damages

amounting to $75,000, and reasonable attorney's fees, not limited

to the $6,250.00 authorized by HRS § 607-14 (2016).

Punitive damages were denied. Noting that

"[r]escission of contract was legally justified at its formation

on December, 29, 2015," and making related findings and

conclusions, the Circuit Court awarded prejudgment interest on

$25,000 at the statutory rate, for 3.25 years.

Zhang later moved for the dismissal of Count Three and

entry of a final judgment. Court minutes indicate that the

Circuit Court "takes no action" on the motion. The Judgment was

entered thereafter, which included Dismissal of Count Three.

(1) & (2) We first consider You's argument that the

Circuit Court erred in finding that she fraudulently induced

Zhang to purchase the subject restaurant.

4
NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

You has not challenged any of the Circuit Court's

Findings of Fact (FOFs), and therefore they are binding upon this

court. See, e.g., Taylor–Rice v. State, 91 Hawai#i 60, 65, 979

P.2d 1086, 1091 (1999). The Circuit Court found, inter alia,

that:
4. In December of 2015, [You] did not actually own
the Restaurant, having previously sold it in September of
2015 to Yang Guang Zhu and Wen Fang, a.k.a. Wen De Coito,
for $20,000.00.
5. To induce [Zhang] to buy the Restaurant, [You]
withheld material facts about the Restaurant's September
2015 sale and its lack of profitability.
6. Instead, during the negotiations for the sale of
the Restaurant with [Zhang], [You] acted as though she still
owned the Restaurant and claimed that it was profitable,
even though it was actually losing money and continued to do
so after the sale had closed.
. . . .

8. Based on [You's] knowingly false representations,
[Zhang] agreed to purchase the Restaurant for $25,000.00 and
paid that amount in full to [You] on December 29, 2015[.]

. . . .
41. Had [Zhang] known that [You] did not own the
Restaurant on December 20 and 21, 2015, [Zhang] would not
have purchased the Restaurant; [Zhang] would have wanted to
meet the real owner to find out why the Restaurant was for
sale.

In light of the Circuit Court's unchallenged FOFs,
including the above, we conclude that the Circuit Court was not

wrong in finding that You fraudulently induced Zhang to purchase

the subject restaurant. Nor did the Circuit Court err in

concluding that Zhang was entitled to rescission of contract,

with You ordered to return the $25,000 to Zhang, and Zhang

ordered to transfer any "title" to the restaurant back to You.

You also argues that the Circuit Court erred in

awarding treble damages and additional attorney's fees pursuant

5
NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

to HRS § 480-13, primarily arguing that the Complaint did not

properly allege a UDAP claim. Even assuming, arguendo, that the

Complaint sufficiently made out a UDAP claim, as noted above, the

Circuit Court's unchallenged FOFs expressly find that Zhang was

not entitled to any damages award for losses she may have

incurred after purchasing the restaurant from You.

With respect to You's fraudulent inducement of Zhang to

purchase the restaurant, the remedy awarded by the Circuit Court

was rescission of the sales contract – You was ordered to return
the purchase money of $25,000 to Zhang, and Zhang was ordered to

transfer any "title" to the restaurant back to You – not an award

of damages. As the Hawai#i Supreme Court has held, "[t]he result

of rescission is to return both parties to the status quo ante,

i.e., each side is to be restored to the property and legal

attributes that it enjoyed before the contract was entered and

performed." Exotics Hawaii-Kona Inc. v. E.I. Du Pont De Nemours

& Co., 116 Hawai#i 277, 288, 172 P.3d 1021, 1032 (2007). Zhang

unequivocally sought, and was granted, the remedy of rescission,

and she did not bring forward evidence supporting an award of any

damages sustained as a result of a UDAP violation, as reflected

in the Circuit Court's FOFs/COLs/Judgment. The Circuit Court did

not award any compensatory damages to Zhang based on a UDAP

claim.

The Hawai#i Supreme Court has held:
To establish a prima facie case for a UDAP claim, [a
plaintiff] must establish "(1) either that the defendant
violated the UDAP statute (or that its actions are deemed to
violate the UDAP statute by another statute), (2) that the
consumer was injured as a result of the violation, and (3)

6
NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

the amount of damages sustained as a result of the UDAP
violation."

Lima v. Deutsche Bank National Trust Co., 149 Hawai#i 457, 464-

65, 494 P.3d 1190, 1197-98 (2021) (quoting Kawakami v. Kahala

Hotel Investors, LLC, 142 Hawai#i 507, 519, 421 P.3d 1277, 1289

(2018)) (emphasis added).

The court in Lima emphasized that a plaintiff "must

establish compensatory damages" to prevail on a UDAP claim. Id.

at 465, 494 P3d 1190 at 1198 ("where a tort claim requires a

plaintiff to 'separately establish damages,' the plaintiff cannot
simply infer damages based upon the alleged tort -- i.e., nominal

damages") (citation omitted). Here, the Circuit Court declined

to award damages to Zhang based on a UDAP claim. The rescission

of a contract for fraud in the inducement is not a damages award.

Hong v. Kong, 5 Haw. App. 174, 181, 683 P.2d 833, 840 (1984).

Thus, we conclude that the Circuit Court erred in trebling the

amount of money ordered returned to Zhang as a rescissionary

remedy and invoking HRS § 480-13(b) as basis for awarding

attorney's fees in excess of the amount permitted under the
assumpsit statute.

(3) & (4) You argues that attorney's fees should not

have been awarded to Zhang, either under HRS § 607-14 or HRS

§ 480-13(b). Because we conclude that Zhang did not establish

all of the elements necessary for relief under UDAP, we conclude

that the Circuit Court erred in awarding attorney's fees in the

amount of $41,053.65. However, You's argument that the

attorney's fees awarded in the amount of $6,250.00 are

7
NOT FOR PUBLICATION IN WEST'S HAWAI#I REPORTS AND PACIFIC REPORTER

unsupported by proper authority is without merit. The Circuit

Court properly found and concluded that contractual rescission is

in the nature of assumpsit and that Zhang was entitled to

reasonable attorney's fees up to $6,250.00 pursuant to HRS § 607-

14.

For these reasons, we vacate the Circuit Court's June

25, 2021 Judgment and March 28, 2019 FOFs/COLs/Judgment to the

extent that the Circuit Court awarded treble damages and

attorney's fees in excess of $6,250.00; we otherwise affirm.
This case is remanded to the Circuit Court for entry of an

amended judgment consistent with this Summary Disposition Order.

DATED: Honolulu, Hawai#i, November 20, 2024.

On the briefs:
/s/ Katherine G. Leonard
Scot Stuart Brower, Acting Chief Judge
for Defendant-Appellant.
/s/ Sonja M.P. McCullen
Wen Shen Gao, Associate Judge
for Plaintiff-Appellee.
/s/ Kimberly T. Guidry
Associate Judge

8